An HFMA Healthcare Financial Pulse Resource
Moody's Investors Service has identified the following list of warning signs that would likely trigger a rating review, regardless of an organization's rating category.
- Decline in total operating revenue (same-store basis)
- Thirty percent decline in operating cash flow
- Greater notional amount of swaps than debt
- Days in account receivables rise to 100 and sustained at this level for two consecutive years
- Failure to deliver audit six months after the fiscal year end; tardy interim statements
- Qualified audit opinion
- Technical default under bond covenants; covenant breach in bank documents
- Unexpected change in CFO
- Unexpected increase in debt (20 percent or more)
- Investment allocation with more than 10 percent in one fund
- More than 70 percent of debt is variable rate (before swaps)
- Unusually high investment returns
- Pension liability funded at less than 80 percent
- Bank bonds with short pay outs or auction-rate debt with high rates
Return to the "Improving Your Hospital Credit Rating" article.
Source: Goldstein, L, et al., Not-for-Profit Healthcare Rating Roadmap: Hospitals Under Stress, but Strong Management and Federal Stimulus May Mitigate Risks, Moody’s U.S. Public Finance, April 2009. Reprinted with permission.