Credit ratings may fall further for healthcare companies if they give in to shareholder pressure to increase returns, with either stock buybacks or leveraged buyouts like the $33 billion deal that took HCA private last year, Standard & Poors said in a new report. Of the healthcare companies rated by S&P, three times as many have a negative credit outlook as have a positive outlook. If downgrades exceed upgrades again in 2007, it would be the first occurrence in back-to-back years this decade. The root of the pressure is the debt capacity that capital markets provide companies, S&P said. Healthcare providers also always face the threat that third-party payers that provide most of their revenue will find ways to cut reimbursements, S&P said. Although the reimbursement climate looks good for 2007, increased efforts to offload costs of care on consumers could become more of a problem in 2008, the ratings agency said. Medical-device makers and pharmaceutical companies also face the medium-term challenge of producing enough innovative new devices and drugs to fend off competitors and the loss of patent protection, respectively. -- by Vince Galloro
Credit ratings vulnerable in 07: S&P
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