New S&P Criteria Bad News for Hospital Districts

HFA Partners  |  March 19, 2018

The methodology S&P published today for not for profit hospitals will not have a negative impact on the majority of standalone providers and health systems, but S&P expects more than half of all hospital districts will be downgraded, some up to three notches.

 

This article was updated on 3/22/2018.

Standard & Poor's released a 42-page document detailing its methodology for rating not for profit acute care hospitals and health systems in the United States and Canada.

The rating agency expects that the "vast majority" of standalone providers will not see a change in their rating as this latest update is substantially similar to the criteria released in December 2014.

S&P expects 10% of health systems will be downgraded due to the criteria, and 20% will see an upgrade.

The news are worse for hospital districts and other tax-supported borrowers: S&P expects 60% will be downgraded by up to three notches, and 10% will be upgraded generally up to two notches.

In a webcast conducted the day after the release, the rating agency explained that tax-secured hospital debt will be disproportionately impacted because 30 (60%) of the 50 tax-supported providers rated by S&P carry a general obligation rating which before the new criteria did not take into account underlying hospital operations.

Only 30% of hospital districts will see their rating unchanged.

The S&P update can be found here (a free subscription is required).



This material is intended for general information purposes only and does not constitute legal advice. For legal issues, readers should consult legal counsel. To discuss this article or municipal advisory services, email or call 888-699-4830. HFA Partners, LLC is an Independent Registered Municipal Advisor registered with the Securities and Exchange Commission (SEC) and the Municipal Securities Rulemaking Board (MSRB) under the Dodd-Frank Act of 2010.
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