Although many not-for-profit hospitals may be at risk of a rating downgrade within the next year or two, the number of affirmations over the last six months have been “substantial,” according to a Standard & Poor’s Ratings Services report. The downgrade-to-upgrade ratio was more than 6:1 from October 2008 through March 2009 versus 4:1 for calendar year 2008, with the key factor in 69% of the downgrades cited as “significant operating losses and pressures.” Smaller hospitals had more downgrades than larger hospital systems, and 77% of the downgrades occurring over the last six months were in the BBB and below category. Yet, 80% of S&P’s rating actions over the last six months have been affirmations. The credit rating updates are emphasizing historical and current operating trends and cash flow in income statements, rather than nonoperating income such as investment performance. “If a health service provider’s fundamental credit factors remain solid in our view, except for the negative effects of the investment market downturn, in most cases we will affirm our rating,” according to the report. “The Impact of Investment Declines on U.S. Not-For-Profit Health Care Provider Ratings” is available at research_request@standardandpoors.com, or at www.ratingsdirect.com for subscribers.
