From where Standard & Poor's sits, there's both good news and bad news when it comes to the not-for-profit healthcare sector. According to a new report from the ratings agency, U.S. Not-for-Profit Health Care Shows Stress as Credit Quality Gap Returns, credit quality is deteriorating under the pressure of a flood of operational and financial issues. On the other hand, many larger systems and well-positioned standalones continue to perform, according to the firm. Still, rising debt and big capital spending plans are a drag on both strong and struggling providers, S&P noted.
One reason S&P is raising this alarm is because the sector's credit rating trends slid to negative faster than expected in the second half of 2007 because of, among other things, slimmer, weaker balance sheets and stronger competition. Meanwhile, rising interest rates for auction-rate bonds are not a plus either. Given these stresses on providers, S&P expects to see ratings downgrades exceed upgrades in 2008, with even more downgrades possible in 2009 and beyond.
To learn more about S&P's credit rating predictions:
- read this Modern Healthcare article (reg. req.)
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