Local successes in trimming costs and responding to managed-care pressures led to far more upgrades than downgrades of tax-exempt hospital debt in the second quarter, according to Standard & Poor's Corp.
The New York-based credit-rating agency said it was the first time in more than a decade that upgrades of municipal healthcare bond ratings significantly outpaced downgrades.
Standard & Poor's raised ratings on 25 credits, affecting $1 billion in debt, and lowered ratings on 17 hospitals, impacting $718.9 million in debt, in the three months ended June 30.
The agency noted that it's premature to call the changes a trend.
In fact, Moody's Investors Service recently reported an opposite pattern. During the comparable three-month period, the New York-based credit-rating agency lowered ratings on 21 hospitals representing $771.1 million in debt and raised ratings on 11 creditsFinance
affecting $609.3 million in debt. Moody's said the downgrades reflect a continuation of credit deterioration in the tax-exempt hospital sector. Nine of the downgrades fall below investment grade.
Many credits were negatively affected by the growth of managed care and limited reimbursements coming from governmental insurance programs, Moody's said.
According to Standard & Poor's, providers in some markets managed to improve their credit positions despite continuing cost-containment pressures. Four of its upgrades were for North Carolina-based hospitals that merged with systems.
"It remains clear that the success of each institution's strategic plan for functioning in a managed-care environment continued to drive many of the rating changes," Standard & Poor's said.