Standard and Poor's outlook for nonprofit healthcare in the U.S. remains negative for next year, despite some relief stemming from merger and acquisition activity, expansion of health coverage under the Patient Protection and Affordable Care Act and booming investment markets.
S&P downgraded the nonprofit sector's outlook to negative this year, and as the rating agency expected when it revised the outlook, there have been more credit downgrades than upgrades in 2014. Without the high level of merger and acquisition activity, S&P believes there would have been more credit downgrades this year.
Continuing the trend, S&P expects there to be more downgrades in nonprofit healthcare than upgrades in 2015 due to a number of factors, including the effect of health reform readiness activities and emerging changes in the payment environment.
Although expanded health coverage under the PPACA is viewed as a positive for the nonprofit sector, there is still uncertainty surrounding some of the health reform law's provisions, which could have a negative effect on nonprofit hospitals and health systems. For instance, S&P cited to King v. Burwell, a case challenging the subsidies millions of Americans receive to help them pay their health insurance premiums.
Although S&P believes some nonprofit hospitals and health systems will be able to manage effectively in the changing healthcare environment, the rating agency expects many will have trouble adapting.
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