Downgrades continues to outnumber upgrades in the nonprofit hospital sector, and it's a trend Standard & Poor's Ratings Services analysts believe will only get worse for hospitals in the speculative grade category.
According to a recent S&P report, healthcare organizations within the speculative grade group — for S&P, having a rating of "BB+" or lower is considered speculative grade — face tough fiscal challenges and "have a markedly weaker financial profile than investment-grade credits."
Earlier this year, S&P analysts gave a similarly grim picture for all nonprofit healthcare organizations, including health systems and smaller, lower-rated hospitals. Medians for speculative grade hospitals, however, generally show the weakest operating performance with low operating margins and high rates of debt. For example, in 2012, S&P rated 35 providers with speculative grade credit. The median operating margin was 0.4 percent, and the median days cash on hand was 85.4. The median operating margin and days cash on hand for all nonprofit standalone hospitals in 2012 was 2.6 percent and 191.7, by comparison.
Since 2010, S&P has lowered the credit ratings of 12 hospitals and health systems from investment grade to speculative grade. Note: The credit rating may or may not reflect the organization's current credit rating.
• Arkansas Methodist Medical Center (Paragould) — from BBB- to BB in 2011
• Coffee Regional Medical Center (Douglas, Ga.) — from BBB- to BB- this year
• Good Samaritan Health System (Lebanon, Pa.) — from BBB- to BB+ in 2010
• Great Plains Regional Medical Center (Elk City, Okla.) — from BBB- to BB+ this year
• Hopkins County Memorial Hospital (Sulphur Springs, Texas) — from BBB- to BB+ this year
• Kuakini Health System (Honolulu) — from BBB- to BB+ in 2011
• Madison Memorial Hospital (Rexburg, Idaho) — from BBB- to BB+ in 2011
• Mercy Medical Center (Canton, Ohio) — from BBB to BB+ in 2011
• Nevada (Mo.) Regional Medical Center — from BBB- to BB+ in 2011
• Oak Valley Hospital (Oakdale, Calif.) — from BBB- to BB+ in 2012
• Saint Peter's University Hospital (New Brunswick, N.J.) — from BBB- to BB+ in 2012
• Tuomey Healthcare System (Sumter, S.C.) — from BBB- to BB this year
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