Upgrades of municipal healthcare debt dramatically outpaced downgrades in the second quarter of 1996, Standard & Poor's Corp. reports.
The New York-based rating agency raised 13 ratings on $900 million of debt and lowered one rating on less than $50 million of debt.
"In general, I believe we're in the sixth or seventh year of a national economic upturn in the economy, and that's had a significant effect on healthcare issuers' finances," says Ken Rodgers, a director of public finance at Standard & Poor's.
Also, as part of the massive restructuring of healthcare delivery that's been taking place for several years, most of the organizations that Standard & Poor's rates "have substantially improved their financial performance," Rodgers says. In particular, they've improved their balance sheets by focusing on boosting cash flow and strengthening liquidity, he says.
As a rule, healthcare organizations have been borrowing less and funding more of their capital projects through cash flow, Rogers explains. When they do borrow, it's only when market opportunities are advantageous.
Notably, several of the quarter's upgrades stemmed from the agency's assignment of an AA- "underlying rating" to Partners HealthCare System, Boston. As a result, Standard & Poor's lifted ratings on several subsidiaries. Those include Boston's Spaulding Rehabilitation Hospital, raised to AA- from A+, and Brigham and Women's Hospital, to AA- from A+ on two series of bonds and to A+ from A on a third series.
In the corporate healthcare sector, upgrades by Standard & Poor's outpaced downgrades by a 2-to-1 margin. The agency raised four ratings on $550 million of debt, including $200 million of subordinated debentures issued by PhyCor, a Nashville-based physician practice management company. PhyCor's outstanding ratings were raised to BB+ from BB, reflecting "the company's enhanced diversification and commitment to moderate financial policies."
Ratings on two corporate credits-Houston-based Paracelsus Healthcare Corp. and Scottsdale, Ariz.-based Unison HealthCare Corp.-were lowered during the quarter, affecting $425 million of debt.