Value-Based Healthcare Needs New Bond Rating Metrics

John Commins, for HealthLeaders Media , May 13, 2013

"This whole value orientation is very tricky for everyone," Arrick says. "Hospitals are moving carefully, and some of the better hospitals are moving faster and want to take full risk because they think they are going to do better. It does amp up the risk but the information around all of this is better than it was 20 years ago."

"But insurance risk is still insurance risk. We are going to find out how you are managing. First and foremost now we are interested in are you prepared for reform? What does it mean in your market? Where is it going? Talk to me about risk in your market. Talk to me about capitation in your market," Arrick says.

Goldstein says hospitals and bond rating agencies will likely spend the next decade or so "operating in two worlds; volume-based and value-based payments" as the transition period unfolds.

"It will be two orbits at the same time," Goldstein says. "It is not as if there is a magical date and everything switches on that date to all value-based no more volume. Hospitals are going to be operating in two different worlds concomitantly. They are going to go through a big transition. We have introduced new ways of measuring this new world."

Even though the reimbursement model is shifting, Goldstein says that doesn't mean that every metric now in use will suddenly become obsolete.

"Much of our analysis is based on the audited financial statements. The audits aren't going to change because healthcare reform is here," she says. "There is going to be a (profit and loss) statement, revenues, expenses, and a balance sheet and a cash flow statement. These are our core financial metrics at this point and we are not anticipating will change. You still look at leverage. You still look at liquidity. You still look at operating margin and profitability, just like we have been looking for 30 years now."

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