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Declining Patient Volumes Threaten Not-for-Profit Bond Ratings

John Commins, for HealthLeaders Media, November 7, 2013

Moody's reports that:

  • Over the first three quarters of 2013, there have been 30 downgrades affecting $10.3 billion in debt affected, nearly double the 18 upgrades affecting $4.8 billion in debt for a ratio of 1.7 to 1.
  • 18 rating changes were made in 3Q 2013, one fewer than 3Q 2012. Downgrades outpaced upgrades by a ratio of 1.3 to 1, compared to an anomalous 0.6 to 1 in 2012 when there were 12 upgrades and seven downgrades.
  • As of Sept. 30, six ratings were under review for downgrade, affecting $1.3 billion of debt. One rating is under review for upgrade, impacting $22.5 million of debt.
  • 72 ratings were affirmed, which represented 80% of all rating activity, affecting approximately $42.5 billion of debt and consistent with the long-standing historical trends. Of the 72 affirmations, seven were accompanied by negative outlook changes and four by positive outlook changes.

"There are some health systems that are doing well and are generally stable or maybe slightly improving and that is in part due to their efforts around cost reductions to offset some of the revenue challenges. In some cases it's due to operating in favorable markets where there is limited competition and/or population growth."

With healthcare reform and bottom line demands favoring economies of scale and market share that come with size, Martin says mergers and acquisitions "will continue at a high pace because of these pressures."

"There are some smaller hospitals that maybe because of their dominance in their market may be able to go it alone for a certain period but in the long run they may need to partner."


John Commins is a senior editor with HealthLeaders Media.

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