Not-for-profit ratings won’t be affected by new standards
New accounting standards that reclassify hospitals’ bad debt won’t affect not-forprofit bond ratings, though they will change some financial ratios compiled and reported by Standard & Poor’s, the ratings agency announced in a new report. The new standards from the Financial Accounting Standards Board reclassify bad debt as a deduction from revenue instead of an operating expense for fiscal years ending after Dec. 15, 2011, though some hospitals have made the change before they needed to do so, the S&P report states. The change will have a positive effect on six ratios reported on by S&P, including days cash on hand, non-operating revenue percent and operating margin, and will have a negative effect on six other ratios, including days in accounts receivable, debt burden and net patient revenue, S&P said. The rule changes don’t affect the underlying economics of the hospital business and also will not change S&P debt ratings of not-for-profit hospitals and systems.