Standard & Poor’s: Prospects For Small Hospitals Better

SAN FRANCISCO—While not-for-profit small hospitals have improved their operations in the past year, speculative-grade health care providers in the U.S. continue to face many challenges, according to Standard & Poor’s Ratings Services reports.

Lower-rated providers face such challenges as operating losses, weak demographics, limited business position, high debt, and low liquidity.

Additionally, they often have aging facilities that require high capital spending that some providers cannot

afford. Industrywide, financial and operational difficulties tend to be more problematic for

lower-rated providers because those providers are more likely to lack the operational flexibility and balance sheet cushion needed to withstand additional strain, according to Standard & Poor’s.

Regarding the larger percentage of downward rating actions in the speculative-grade category and more providers joining the ranks, Standard & Poor’s credit analyst Kenneth Gacka said in a report: “We believe these rating trends will likely continue over the near to medium term.” See “Volatile Times Continue For Speculative-Grade Health Care Providers.”

“We believe that the sector’s response to the recession, which focused on tightening expenses and strengthening service lines, have helped small hospitals improve operating margins,” said credit analyst Avanti Paul in the report, “U.S. Not-For-Profit Small Hospitals Move Toward Stability.”

Source: Standard & Poor’s media division.