Despite relatively strong credit conditions in the national healthcare sector, not-for-profit hospitals and health systems at the lower end of the rating spectrum face multiple credit risks that are likely to only intensify over the next few years, according to a report released Sept. 26 by Standard & Poor’s Ratings Services.
The report, U.S. Not-for-Profit Health Care 2007 Speculative-Grade Medians, shows that the reasons that lower-rated credits are struggling often include weak demographics, small size, limited business position, and abundant competition. These factors have left speculative-grade organizations less able to take advantage of favorable revenue and volume trends that are common among investment-grade organizations, leaving them vulnerable in the next industry downturn.
As many high-investment-grade organizations continue to perform well, build reserves, and invest heavily in capital improvements, a gap is growing between the industry’s “haves” and “have-nots,” making it even harder for lower-rated organizations to regain secure competitive and financial footing.
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