S&P issues stable outlook for nonprofit healthcare despite looming ACA repeal

S&P Global Ratings' outlook on the nonprofit healthcare sector is stable in 2017, despite the sector facing a likely repeal of the ACA.

Although S&P's ratings and financial medians support its outlook on the sector, the rating agency may change its outlook in the near future.

"…we see a growing potential for credit quality deterioration based on the latest results from some providers, and the possibility the outlook could turn negative after the new administration and Congress are sworn in, given their intention to drastically alter the ACA and many long-term legislative tenets of the overall healthcare delivery system," said Kevin Holloran, an S&P Global Ratings credit analyst. 

Even without any major legislative changes, many hospitals are facing renewed expense, revenue and volume pressures, as the initial positive effects of Medicaid expansion have ended. S&P said there has recently been an increase in the number of providers with weaker financial and operating performance.

"We believe the sector peaked in 2016 from a financial and operating metric perspective, although change is evolving slowly and is based on existing legislative healthcare framework," said S&P.

The rating agency emphasized that 2017 is not all doom and gloom for the nonprofit healthcare sector.

"Continued implementation of fundamental operational improvement initiatives and strategies…should continue to provide financial flexibility under any type of payment system," said S&P.

Two other major rating agencies, Moody's Investors Service and Fitch Ratings, have also issued stable outlooks for the nonprofit healthcare sector in 2017.

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