Moody’s downgrades Indiana’s Good Samaritan Hospital and places Detroit’s Henry Ford Health System under review

Moody's Investors Service has downgraded the bond rating of Good Samaritan Hospital in Vincennes, Indiana, to Baa1 from A3 on $82.1 million of outstanding debt, and it is considering also downgrading the Detroit-area’s Henry Ford Health System’s $831 million of debt. It currently has an A2 rating.

According to the New York-based ratings agency, both are leading hospital systems in their markets, but their operating cash flow generation and debt coverage measures have been weakened by a variety of factors including the rollout of Affordable Care Act (ACA) provisions that mandate cuts to certain types of healthcare spending, encourage shifting of services to the lower-cost outpatient setting and increase fees paid by health insurers.

For Henry Ford, the struggles of the local Detroit economy and increasing competition from affiliations between competitors is also playing a role, Moody’s noted. For example, last month competitors Beaumont Health System, Botsford Health Care and Oakwood Healthcare announced that they planned to merge their operations.

Overall, Moody’s sees recent proposals released by the Centers for Medicare & Medicaid Services (CMS) as mostly positive for providers of inpatient healthcare services, its most recent credit research report on the sector noted. This is true even after considering various reductions to Medicare market basket increases mandated by the Affordable Care Act (ACA).

However, changes related to the ACA will of course have different impacts on different providers.