Declining Liquidity = Low Bond Ratings for Hospitals

Per a recent statement made by Standard & Poors (S&P), hospital bond ratings across the U.S. have plummeted due to continued declines in liquidity.

Because interest rates are based upon the creditworthiness of the issuer and the conditions in the financial market, many hospitals and healthcare providers are finding it more and more difficult to get and maintain a positive bond rating.

SCH's MAR Funding program can provide a much needed boost to hospitals' and healthcare providers' credit ratings. MAR funding is not dependent on the availability of credit and serves as a source for working capital that can actually be used to improve liquidity.

By using the cash flow generated from MAR funding as working capital, profitability can be restored and a healthier balance sheet can be attained.

Hospital Borrows and Loses Millions

Carilion Clinic is losing and borrowing millions as it converts from a hospital to a clinic system.

Construction and recruiting physicians to support the changes has taken a toll on Carilion's bottom line. That, combined with other expansion projects, a down economy and a volatile market, has Southwest Virginia's largest hospital system reporting a $39.7 million loss for the first six months of the fiscal year.

Hospital revenue bonds worth $50 million and $110 million were issued July 1 for Carilion. Of the $160 million, Carilion has already spent $52 million, according to a bond prospectus dated July 8.

Another source of obtaining working capital to fund Carilion's capital improvement projects is Medical Accounts Receivable (MAR) Funding. MAR funding is a customized funding program for healthcare providers/suppliers. By using the funds generated from MAR Funding, no debt is incurred allowing for a healthier balance sheet and an opportunity to improve credit rating when additional bond issues are under consideration.

Ratings Drop as Hospitals Bleed from Bottom Line

Per recent reports, bond ratings for hospitals have dropped significantly.

In many of these cases, the reasons for the downgrades were similar - big operating losses in fiscal 2007, declining patient volume, and concerns about the hospitals' ability to turn themselves around.

Medical Accounts Receivable (MAR) funding presents an opportunity for hospitals and other healthcare providers to protect and maintain bond ratings. MAR Funding boosts liquidity which makes for a healthier balance sheet.