Hospitals and health systems don't have to worry about a plunge in their credit ratings as a result of losing money on physician practices.
Standard & Poor's says it's unlikely to lower a hospital's credit rating based on losses in physician practices, providing the hospital has a sound strategic plan.
Despite widespread losses in physician practices owned by hospitals and health systems, a credit-rating downgrade usually can be averted by offsetting factors, according to the New York-based credit-rating firm. But Standard & Poor's is intensifying its focus on a hospital or system's "vision" of how acquired practices fit into a long-term financial strategy and whether that strategy is working.
"In certain markets, such as Philadelphia, Boston and Orlando (Fla.), competitive forces are driving hospitals to employ doctors as the industry consolidates and focuses its attention on controlling costs. Physicians, directly and indirectly, control as much as 80% of all (healthcare) spending," says Elizabeth Sweeney, a director in the Standard & Poor's not-for-profit group.