NEW YORK - Moody's Investors Service said it has released an updated methodology for U.S. not-for-profit healthcare issuers that includes a new scorecard to enhance the transparency and clarity of its approach to evaluating the credit quality of hospitals and health systems. Moody's rates 533 hospitals and health systems with $181 billion in outstanding debt.
"The scorecard replaces a prior matrix that provided measurable and descriptive characteristics by broad rating category for each of five key factors," said Moody's Analyst Daniel Steingart, author of the report.
Steingart said the scorecard helps market participants determine a rating based on audited and other easily sourced data, as well as non-quantitative factors. Non-quantifiable factors such as management, governance, debt structure and legal covenants are explicitly incorporated into the rating. The quantitative factors include market position, operating performance, and balance sheet and capital plan.
"The methodology is a reference tool that helps investors, borrowers, and other interested market participants understand how key characteristics drive and influence rating outcomes," said Steingart. "It also describes the ratios that we generally apply to hospitals and that are major drivers of hospital ratings."
However, he cautioned, it does not include an exhaustive discussion of all factors and ratios that might be considered relevant in determining an individual hospital's unique credit attributes.
"Moody's analysis considers such sector-specific factors as payer mix, federal regulatory reform and reimbursement trends" said Steingart. "It also covers credit factors that are common across many public finance sectors, including governance, operating profitability, and balance sheet strength."
The document replaces a prior methodology for the sector that was issued by the rating agency in 2008.