Bond Rating and Investment

Bond rating services classify healthcare entities in the broad category of U. S. Public Finance. Within public finance sector, public utilities (especially nuclear power plants) are considered slightly more risky than a tax-exempt security for healthcare entities. There are no AAA bonds in healthcare that are based on the financial viability of the hospital. Many hospitals that issue bonds have debt insurance that may guarantee the principal and interest so that a AAA bond-rating is given for the issue based on the "creditworthiness" of the insurance company or commercial bank.

Two dominant corporations providing healthcare debt insurance coverage are FGIC (Financial Guaranty Insurance Company) and MBIA (MBIA Inc.).

The three principal bond rating services are Standard & Poor's, Moody's
Investors Service, and Fitch IBCA, Inc. Standard & Poor's and Moody's
Investors Service are much more restrictive in the types of healthcare entities
they will review versus Fitch IBCA, Inc.

Fitch IBCA, Inc. provides ratings of healthcare bonds for hospitals, health systems, academic medical centers, continuing care retirement communities, nursing homes, assisted living facilities, physician practice groups, faculty practice plans, social service providers, health maintenance organizations, and medical research institutes.

Moody's Investors Service has recently modified their Internet addresses. Healthcare is part of the U. S. Public Finance sector. Within Public Finance, the options are research, rating actions, special reports, watchlist, ratings definitions, rating methodologies, and key contacts. For information on a specific hospital use "Quick Search" at top of page. For example, search by "Issuer Name" and for "Northwestern Memorial Hospital" will result in information on four bond issues.

Standard & Poor's has also modified their Internet Web site. You can also see their Ratings page.

On the Ratings page, there are several choices, including Public Finance, Search, or Criteria. Under Search, if you enter "Health care bond ratings", the Web site will direct you to two manuals. Chapter 3 in the first of these references contains several sections on healthcare entities beginning with "Health Care, Higher Education and Other 501 (C) (3) Financing" and continuing through "Academic Medical Centers." See also their Focus on Healthcare.

A.M. Best Company, Inc. provides ratings for about 99 percent of insurance companies; A.M. Best also performs some ratings of healthcare entities (including health maintenance organizations).