LOS ANGELES - State Treasurer Bill Lockyer has asked the California Debt and Investment Advisory Commission to study the disclosures non-profit hospitals make to the bond market.

The request was made in response to a letter sent by the Service Employees International Union - United Healthcare Workers West last week requesting such a study to ensure that disclosures adequately describe the impact of federal and state health care reform.

"The state treasurer's office has received SEIU's letter and has asked the CDIAC, which I chair, to review the concerns raised by SEIU as they relate to financial disclosure practices not only within the not-for-profit health industry but in other private industries that directly benefit from the issuance of tax-exempt bonds," Lockyer said in a statement. "If a formal study appears to be warranted, it would be undertaken later this year."

The union, which claims membership of more than 150,000 Western healthcare workers sent the letter, dated Feb. 18, voicing concerns of how the health care reform would affect the industry.

"In this reform-driven environment, all hospitals will need to control costs and ensure high quality health care," the union's president, Dave Regan, wrote in the letter. "Health systems will be required to alter their business strategies, and analysts expect a wave of mergers and acquisitions."

They also noted that credit rating agencies disagree about how non-profit hospitals will be affected overall, with Standard & Poor's predicting an overall net positive effect, and Moody's Investors Service calling the Affordable Care Act a credit negative for not-for-profit hospitals.

"SEIU-UHW's analysis is that the impact will vary: While some hospitals will thrive, some are poorly positioned to weather these transformations, and may suffer severe financial downturns and even bankruptcy," Regan said.

Regardless of the reform's impact, bond disclosures addressing the reform are uneven in quality, he said, with some discussing it at length, but in generic terms, and most failing to provide any specific analysis about how it would impact a borrower.

Regan asked that the treasurer work with the CDIAC to conduct further analysis in order to provide guidance on disclosure best practices, which he said would benefit all market participants.

The union has a combative relationship with many of California's large nonprofit hospital operators, and is backing a petition campaign to qualify a statewide ballot initiative to regulate hospital pricing.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.