Standard & Poor's on Small Hospitals

NEW YORK (Standard & Poor's)
Dec. 22, 2008

Despite having generally riskier credit characteristics, not-for-profit small hospitals have continued to perform well relative to their larger stand-alone counterparts in the U.S. mainly because of the essentiality of and historic political support for their services, Standard & Poor's Ratings Services said today in a report.

"With the exception of the 'BBB-' rated providers, small hospitals' 2008 performance median ratios reflected improvement from a year earlier and none of the financial softness evident in the stand-alone hospital and health system ratios," said Standard & Poor's credit analyst Charlene Butterfield. The 2008 median ratios, which are based on fiscal 2007 results, are discussed in the article, “U.S. Not-For-Profit Small Hospitals Look Healthy In 2008 Median Ratios,” on RatingsDirect. Small hospitals usually have less than $90 million in annual net patient revenue and are often based in rural locations where they tend to be the sole health care provider.

Within the group, the median ratios reveal a marked divergence in performance between higher-rated and lower-rated small hospitals, particularly the 'BBB-' credits, suggesting that those at the lower end of the rating scale are facing greater financial and operating pressures.

While small hospitals on the whole may have avoided some of the operating pressures faced by larger providers, Standard & Poor's expects the group will exhibit the same trend of increasing operating pressure in 2009.