NEW YORK (Standard & Poor’s) Oct. 22, 2014– Standard & Poor’s Ratings
Services does not currently expect any near-term rating actions in the health
care sector as a result of the Ebola situation. However, we recognize that
preparedness will be an added financial expense for many providers and it is
already affecting senior management time and energy.
The current progression of Ebola could take one of at least two tracks, in our
view. One, the current spread of the disease could be contained, and the
health care sector–and the nation as a whole–could come to terms with the
U.S. being exposed to this disease. We currently believe that the financial
and credit impact would likely be modest and incremental in this case. Two,
the Ebola outbreak could continue to spread, in which case we believe the
sector will likely respond in ways not yet determined. The financial effects
and resulting credit impact, if any, under the second scenario cannot be known
at present. However, we believe that the following issues would be relevant
credit considerations if the issue were to progress along the second track:
- What additional costs will be required in equipment, training and
protocols for patients who present with Ebola or suspected Ebola? Will
hazardous waste disposal problems emerge? Who pays for it? Is the cost
borne by each individual hospital, the local government, or will federal
dollars be available? - Will hospitals face a stigma from treating patients, potentially driving
other patients away from the facility? - Similarly, will an Ebola stigma create personnel shortages of nurses and
other health care professionals if they choose not to be present if Ebola
patients show up at their facility? - If providers are forced, or choose, to forego business as they manage
this disease, will business interruption insurance cover these costs?
Will there be lawsuits for deaths and the potential spread of the
disease? Will malpractice costs go up?
While the Ebola situation is dominating the headlines, there are many other
public health issues, such as the flu, that we believe already have a bigger
impact on overall morbidity and mortality in the U.S. Indeed, annual
fluctuations in flu severity impact reported hospital patient volume trends
with possible implications for profitability.
Standard & Poor’s will continue to monitor Texas Health, where to date two
health workers contracted the disease, as well as other health care providers
and other health-related for-profit entities for any immediate financial
impact, both positive or negative. For example, a handful of selected
health-related suppliers in the for-profit space could experience a spike in
demand, especially those that provide protective gear. However, we expect the
incremental costs related to Ebola preparedness will be but one more cost
pressure on U.S. providers, and one more factor contributing to our view on
the credit quality of health-care providers.
Standard & Poor’s Ratings Services, part of McGraw Hill Financial (NYSE:
MHFI), is the world’s leading provider of independent credit risk research and
benchmarks. We publish more than a million credit ratings on debt issued by
sovereign, municipal, corporate and financial sector entities. With over 1,400
credit analysts in 23 countries, and more than 150 years’ experience of
assessing credit risk, we offer a unique combination of global coverage and
local insight. Our research and opinions about relative credit risk provide
market participants with information and independent benchmarks that help to
support the growth of transparent, liquid debt markets worldwide.
Primary Credit Analyst:
Martin D Arrick, New York (1) 212-438-7963;
[email protected]
Secondary Contacts:
J. Kevin Holloran, Dallas (1) 214-871-1412;
[email protected]
David P Peknay, New York (1) 212-438-7852;
[email protected]
Lucy B Patricola, CFA, New York (1) 212-438-3006;
[email protected]
Joseph N Marinucci, New York (1) 212-438-2012;
[email protected]
Media Contact:
Alex Ortolani, New York 212-438-5054;
[email protected]