While provider borrowing trends aren't usually driven by consumer markets, this time it's inescapable. Bruised by losses in the subprime mortgage market, which has begun to tank, lenders are beginning to tighten up their standards and cut back on the amount of capital they're willing to commit. In addition to limiting capital investment options, the slowdown in financing options has begun to affect the pace of hospital M&A deals as well.
These new market stresses have affected not only traditional lines of credit, but also bond issues. While rates were once similar for higher-and lower-risk hospital borrowers, bond lenders are beginning to charge significantly more for borrowers with weaker credit. Today, hospitals are likely to do better if they can achieve AAA credit guarantees using bond insurance. In the mean time, financial institutions are now wondering why they lent out money at aggressive rates to hospitals with junk-bond level credit ratings. (Same reason the subprime lenders gave $500K mortgages to people working in food service?)
To learn more about this trend:
- read this Modern Healthcare article
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