Standard & Poor's will revise ratings system for hospitals

The ratings service Standard & Poor's apparently plans to revise its criteria for judging the creditworthiness of individual non-profit hospitals--a change that could cause a lot of hospital rankings to plunge, Becker's Hospital Review reported.

S&P plans to apply the same criteria for municipal ratings to hospitals, according to a request for comments it recently issued. Factors such as market position would account for as much as 50 percent of the final ratings, with economic fundamentals, governance and management receiving relatively less weight. It will break the hospital's market position into several components, including payer mix, medical staff and technology and information systems use.

The ratings agency shifts back and forth on its feelings regarding the non-profit hospital sector. Early last year, it cited a tough operating environment for hospitals in the coming years. But last August S&P noted that many hospitals had rebuilt their finances to levels prior to the onset of the Great Recession in late 2007 and early 2008. And in 2011, it noted that many hospitals would fare fine in the current operating environment, although it expected patient admissions to remain flat for the foreseeable future.

"The purpose of the proposed criteria is to provide additional transparency and comparability to help market participants better understand our approach in assigning ratings to acute-care, standalone healthcare providers, to enhance the forward-looking nature of these ratings and to enable better comparisons between the sector's ratings and all other ratings," S&P said in its comments request.

The new ratings system could reshuffle the hospital financial hierarchy, according to Becker's.  It could downgrade as many as 15 percent of the hospitals, but upgrade 5 to 8 percent.  S&P will accept comments from outside sources until March 7, 2014.

To learn more:
- read the Becker's article
- here's the S&P request for comments document