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).