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Accounting Changes For For-Profit Hospitals Will Result In Artificial Increases In EBITDA Margins Jan 12
Standard & Poors, Jan 2012
Abstract
As we near the season for earnings reports for the quarter ended Dec. 31, 2011, Standard & Poor's Ratings Services expects many of the for-profit hospital companies to adopt the Financial Accounting Standards Board's (FASB) recent standard regarding the presentation and disclosure of bad debt. All else equal, we expect this change to result in an artificial increase in reported EBITDA margins, simply due to the new required presentation. As a result, we would not view such an increase in EBITDA margins as an improvement in the financial risk profiles of these companies. Last year, the FASB finalized changes in the accounting rules around the presentation of the 'provision for doubtful accounts' in the income statement. This line item, which...
Companies mentioned in this report are: Tenet Healthcare Corp.,Universal Health Services Inc.,Health Management Associates Inc.,Community Health Systems Inc.,LifePoint Hospitals Inc.,Prospect Medical Holdings Inc.,HCA Holdings Inc.
Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.
Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.
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