Downgrades of municipal healthcare bond ratings surpassed upgrades last year as providers struggled to adapt to market changes.
Standard & Poor's Corp., New York, lowered ratings on 32 issues worth a total of $900 million in debt and raised ratings on 19 issues worth a total of $1 billion.
The rating agency excluded healthcare issues affected by the downgrade of the California Mortgage Loan Program, which insures numerous healthcare credits in the state. The downgrade of Cal-Mortgage resulted from the downgrade of California's $18.4 billion of general obligation debt, Standard & Poor's said.
Meanwhile, Moody's Investors Service, New York, reported a similar pattern of deteriorating ratings. Moody's lowered its ratings on 34 issues worth a total of $2.1 billion and raised 21 ratings worth $1.1 billion.
Standard & Poor's said the upgraded facilities were able to adapt to a more restrictive reimbursement environment. Many solidified their market positions through mergers, affiliations or internal expansions, resulting in the creation of geographic networks or expanded service lines. The successful facilities also managed to lower their per-unit costs, the agency said.
But many facilities were unable to adapt to falling hospital admissions and reimbursement rates. "In many cases, the downgraded facilities are single-site hospitals in competitive markets that have been unable to keep up with the rapid pace of change," Standard & Poor's said.