S&P Ratings on U.S. For-Profit Healthcare Companies Stay Same
March 6—Although Medicare faces a 2 percent reduction in payments due to sequestration, Standard & Poor’s Ratings Services is not taking immediate action to change ratings on for-profit healthcare companies, the rating agency said in a release.
Payment risk is one of the most important credit factors in the rating agency’s analysis of healthcare companies that rely on third-party sources of revenue, according to a report released by Standard & Poor’s, Ratings On U.S. For-Profit Health Care Companies Remain Stable Despite Sequestration's Effect On Medicare Payments.
However, Standard & Poor’s recognizes that for-profit healthcare companies actively manage their operations to lessen the effects of payment cuts, through seeking ways to reduce costs and seeking new business opportunities to enhance revenue, the agency said.
Standard & Poor’s analysis takes into account the effect of both realized and prospective payment changes for all payers, including Medicare, Medicaid, and private insurance companies.
HFMA Analysis: It’s not surprising that S&P stood pat on ratings after the sequester. The rating agencies have had this cut built into their evaluations for some time, given the sequester was well telegraphed, with the law in effect since August 2011. And the 2 percent cut was likely the best-case scenario; any deal related to the sequester likely would have focused on reducing the impact on the Defense Department at Medicare’s expense. Wall Street analysts’ bigger concern will be how providers manage another round of cuts if an additional deficit reduction package is passed later this year. Many analysts believe providers have harvested the “low-hanging fruit” related to cost reduction, leaving only “sustainable radical restructuring” of the cost base as a viable source of new expense reductions.
Publication Date: Wednesday, March 06, 2013