Not-for-profit ratings won’t be af­fected by new stan­dards

Modern Healthcare - - LATE NEWS -

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.

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