LOS ANGELES — Not-for-profit hospitals may face greater credit risks in the event of a repeal of the Affordable Care Act, potentially jeopardizing their stable outlook, S&P Global Ratings analysts said.
S&P analysts on Jan. 10 affirmed the hospitals' stable outlook for 2017, saying it was supported by 2015 financial medians and 2016 ratings and outlook changes demonstrating continued sector strength and resilience. A Dec. 31 S&P ratings round-up, showed 43 upgrades compared with 37 downgrades and 407 ratings affirmations for the entire healthcare sector, including stand-alone providers, health systems, senior living and human service providers. Stand-alone hospitals are feeling industry stresses more acutely than their system counterparts, S&P said.
S&P analyst Kevin Holloran acknowledged, however, that an Obamacare repeal could change the landscape.
"We see a growing potential for credit quality deterioration based on the latest results from some providers, and the possibility the outlook could turn negative after the new administration and Congress are sworn in, given their intention to drastically alter the ACA and many long-term legislative tenets of the overall health care delivery system," Holloran said.
Republicans in Congress are debating whether to repeal Obamacare immediately or wait until they have a replacement plan that can be enacted quickly when President-elect Trump takes office Jan. 20. They have failed to come up with a concrete replacement plan in the nearly seven years since the law was enacted. Trump told the New York Times Tuesday that he thinks the law should be repealed immediately.
Lamar Alexander, R-Tenn., chair of the Senate Health, Education, Labor and Pensions Committee on Tuesday proposed a three-step plan for repealing and replacing Obamacare simultaneously and concurrently.
"To me, 'simultaneously' and 'concurrently' mean Obamacare should be finally repealed only when there are concrete, practical reforms in place that give Americans access to truly affordable health care," Alexander said in a speech on the Senate floor. "The American people deserve health care reform that's done in the right way, for the right reasons, in the right amount of time. It's not about developing a quick fix. It's about working toward long-term solutions that works for everyone."
Meanwhile, Democrats have continued to encourage uninsured Americans to sign up for health coverage under the existing law.
The S&P analysts wrote that they think the not-for-profit healthcare sector peaked in 2016 from a financial and operating metric perspective, because a lot of the additional funding from Obamacare is now baked into financial metrics.
Aside from repeal worries, analysts wrote, there also has been a recent increase in healthcare providers showing weaker financial and operating performance for a variety of reasons.
S&P analysts called it highly likely that there would be meaningful change in "both the Affordable Care Act and important foundational healthcare legislation governing Medicare, Medicaid, and the insurance sector."
