Standard & Poor's unveiled its new proposed framework toward rating stand-alone hospitals, and about 90 hospitals would see their rates change if the framework is adopted as planned.
Though the changes currently affect just a subset of the hospital community, about 450 hospitals, anyone interested in hospital finance should pay attention because the ratings agency is undergoing a broader reworking of its ratings approaches. That means a similar move could come within S&P's health system ratings. Martin Arrick, managing director of U.S. public finance at Standard & Poor's Ratings services, said in an interview that he couldn't comment on how the agency's ratings process for hospitals might or might not relate to ratings for health systems.
Arrick did note that S&P is undergoing a companywide reworking of its ratings processes in a bid to boost transparency and, naturally, the entire public finance group is subject to that. "We're going to adhere to S&P policy," he said.
What S&P unveiled regarding its proposed ratings process for stand-alone hospitals is a two-pronged approach based on separate scores of both a hospital's financial profile and its enterprise profile. Each score, from 1 to 6, is applied to a six-by-six grid containing S&P ratings. The scores are matched on the grid, with some potential for analyst consultation, to produce what S&P calls an "initial indicative rating."
The final rating is arrived at after applying additional screens, caps and overrides, including the recognition of such factors as extremely high reserves or weak management, according to an S&P webinar. "Hopefully, not too many credits will need overrides," Arrick said.
As it stands, the agency expects that roughly 12 to 15 percent of stand-alone hospital ratings would be lowered and 5 to 8 percent would be raised, generally by one notch, according to its website.
S&P wants to know what you think about their framework, and is requesting feedback on such things as its rating factors, subfactors and weightings. Comments are due March 7 and can be sent to CriteriaComments@standardandpoors.com.