Downgrades of healthcare bonds issues outpaced upgrades by more than a 2-1 margin in 1993, Standard & Poor's Corp. said last week.
Ratings were lowered on 73 hospital and healthcare bond issues that were sold for a total of $2.5 billion. Upgrades affected 34 issues worth $1.2 billion, the New York-based credit-rating agency said.
However, two events significantly hurt ratings in 1993: the deregulation of New Jersey's hospital industry and the downgrade of Industrial Indemnity Co., a bond insurer (Feb. 8, 1993, p. 16), Standard & Poor's said.
When those events are removed from the picture, ratings changes on healthcare bonds appear "relatively balanced," with 31 upgrades totaling $1.1 billion and 35 downgrades worth $1.3 billion, the agency said.
In the fourth quarter of 1993, Standard & Poor's raised the ratings on six issues totaling $114.1 million and lowered ratings on three issues worth $86.4 million.
Typically, the hospitals whose debt ratings were lowered in 1993 were "single-site facilities in competitive service areas with high levels of leverage," the agency said. Half of the downgrades affected facilities in California, where managed-care payers currently are demanding deep discounts, it said.
Such pressures will continue to affect ratings in 1994, said S&P's Ratings Group President Leo C. O'Neill. For the most part, for-profit hospitals are better-situated because they're used to operating in a competitive environment, while the outlook for not-for-profits is "generally negative," he said.
"Those (hospitals) with strong financial positions|.|.|.|are best suited to survive and even thrive in this market," he added.
Moody's Investors Service, another top bond-rating agency, expected to issue its count of 1993 healthcare ratings changes late last week.-Karen Pallarito