US healthcare companies will likely see more credit rating downgrades than upgrades in 2018, according to Fitch Ratings.
Fitch attributes the increased pressure on industry credit ratings to the uncertain future of the ACA, a changing tax plan, the adoption of alternative payment models and the potential for outsider disruption, which includes Amazon’s entrance into healthcare and advancements in technology.
Further, Fitch explains that technology is increasingly moving patients away from hospitals and enabling decentralization — thus reshaping the healthcare landscape. Due to this changing landscape, the healthcare industry is, “facing secular challenges to pricing power and profitability and these forces are expected to influence certain segments more than others in 2018,” Fitch notes.
However, despite the higher potential for credit downgrades, the US healthcare sector outlook is stable for 2018 due to sheer demand for services, an overall favorable liquidity profile, and generally consistent leverage and debt coverage.