Standard & Poor's revised criteria for rating standalone, nonprofit hospitals has led to the rating agency making more credit upgrades than downgrades, according to a recent report by HFA Partners.
S&P released its revised methodology in December 2014. The new criteria "represented a major step toward increased transparency in the rating process," according to HFA Partners. However, when the methodology was released it was unclear how it would affect hospital ratings, and many hospitals were concerned they could end up downgraded.
In the past four months S&P has taken 16 actions on borrowers using the revised criteria — 10 being the sole result of applying the new methodology and six based on a combination of the new criteria and changes in the borrower's credit picture, according to HFA Partners.
Eleven of the rating actions taken in the past four months were upgrades, including one system that was upgraded two notches and another that was upgraded three notches. Five of the rating actions were downgrades, including one system that was downgraded two notches.
HFA Partners noted that these results may be premature, as it is possible that S&P is getting to upgrades first and will handle downgrades later in the year. However, if the rating actions reviewed so far are any indication of how actions will continue to go, "hospitals may not have as much to worry about after all," according to HFA Partners.
More articles on healthcare finance:
The $253M battle between 2 Illinois hospitals
Erlanger profit increases on higher patient volume
Mercy Health's profit plummets 62% in 2014