Massachusetts’ health care cost-containment law could pressure the credit quality of providers, Standard & Poor’s said Tuesday.
Gov. Deval Patrick on Aug. 6 signed a bill that requires health care providers across the state to limit spending increases to a rate that does not exceed the gross state product through 2017 and at half a percentage point below the GSP for the following years. The penalty for noncompliance is $500,000.
Standard & Poor’s said in a report that the new law could compress operating margins.
“However, not all of the possible effects are clear, leaving providers with many uncertainties,” it said.
The rating agency believes bond ratings will likely remain stable for at least the next 18 months as they did after Massachusetts implemented its health care overhaul legislation.
“Over the longer term, however, Massachusetts providers could be at a disadvantage if they are unable to cut costs deeply or quickly enough to meet the law’s requirements,” Standard & Poor’s said.
Standard & Poor’s and Fitch Ratings rate Massachusetts’ general obligation bonds AA-plus. Moody’s Investors Service assigns a Aa1.