Exposure Draft: U.S. Not-For-Profit Hospitals andHealth Systems Rating Criteria


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Fitch Ratings has proposed rating criteria changes for nonprofit hospitals and health systems.

Here are five things to know.

1. Fitch said the proposed criteria changes include introduction of revenue defensibility, operating risk and financial profile rating factors as well as individual assessments for each of those factors.

2. Other proposed criteria changes from Fitch include “financial profile alignment with business profile in rating assessment; forward looking consideration of the impact of existing or needed capital investments that may increase financial leverage; and introduction of FAST, an issuer specific scenario analysis tool measuring investment portfolio stress linked to asset allocation, stress on revenue and cost growth rates.”

3. The overall goal with the proposed criteria changes is “to communicate Fitch’s credit ratings more clearly and better express the characteristics that affect a credit’s relative resilience in changing economic conditions,” said Fitch Senior Director Kevin Holloran.

He added, “Fitch believes that this will facilitate a more forward-looking approach to ratings and will better highlight differences among credits within the same rating category.”

4. The agency said it anticipates “fewer than 15 percent of ratings will be affected, with a roughly equal mix of upgrades and downgrades” as a result of the proposed criteria changes.

5. Fitch is accepting comments on the proposed criteria changes via email until Oct. 20. The full Fitch report on the proposed criteria changes is available here.

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