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Moody's Anticipates Ratings Downgrades for Kindred, LifePoint

Analysis  |  By John Commins  
   June 24, 2021

After announcing plans to merge, the outlook for both for-profit health systems was revised down from stable to "under review."

Moody's Investors Service has placed LifePoint Health Inc. and Kindred Healthcare on review for bond rating downgrades following the announcement this week that the two for-profit hospital companies were merging.  

The outlook for both for-profit health systems was revised down from stable to "under review," Moody's said.

"LifePoint faces a moderate level of implementation risk, however, with respect to the outsourcing of revenue cycle management functions at some of its hospitals over the next few quarters," Moody's said, adding that it "has very low growth expectations for non-urban hospitals given multiple industry headwinds."

As for-profit hospital operators, Moody's said Kindred and LifePoint also face "high social risk."

"The affordability of hospitals and the practice of balance billing has garnered substantial social and political attention. Hospitals are now required to publicly provide the list price of all of their services, although compliance and practice is inconsistent across the industry," Moody's said, adding that the hospitals' reliance on Medicare, Medicaid and other government payers makes the hospitals particularly suseptible to reimbursement changes.

"Further, as LifePoint is focused on non-urban communities, slow population growth tempers the company's capacity to grow admissions," Moody's said.

Brentwood, Tennessee-based LifePoint, which merged with RegionalCare in 2018, operates 88 hospitals in 29 states, with revenues of approximately $8.2 billion annually. LifePoint is owned by Apollo Management, and Moody's said the private equity firm could deploy "aggressive financial policies."

"While LifePoint may pursue an IPO longer-term given its large scale, Apollo may take dividends along the way, particularly if the company achieves its cash flow and deleveraging goals," Moody's said.

Like LifePoint, Moody's notes that Louisville, Kentucky-based Kindred, "faces social risk but less so than operators in the general acute-care space."

"The affordability of hospitals and the practice of balance billing has garnered substantial social and political attention. However, this is less of an issue in the IRF (inpatient rehabilitation facility) and LTAC (long-term, acute-care) space because patient stays in these facilities are never a "surprise,'" Moody's said.

Kindred is one of the largest long-term and acute rehabilitation care providers in the nation, with annual revenues of about $3.1 billion. The hospital chain is owned by private equity firms TPG Capital and Welsh, Carson, Anderson and Stowe.  

“The affordability of hospitals and the practice of balance billing has garnered substantial social and political attention. Hospitals are now required to publicly provide the list price of all of their services, although compliance and practice is inconsistent across the industry.”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

As for-profit hospital operators, Moody's said Kindred and LifePoint face "high social risk."

Brentwood, Tennessee-based LifePoint, which merged with RegionalCare in 2018, operates 88 hospitals in 29 states, with revenues of approximately $8.2 billion annually.

LifePoint is owned by Apollo Management, and Moody's said the private equity firm could deploy "aggressive financial policies."

Kindred is one of the largest long-term and acute rehabilitation care providers in the nation, with annual revenues of about $3.1 billion.

Kindred is owned by private equity firms TPG Capital and Welsh, Carson, Anderson and Stowe.


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