New Massachusetts Law Credit Effect on Health Care Providers is Uncertain

A new Massachusetts law that aims to make affordable health care coverage for everyone in the state will have a neutral credit effect for some non-profit health care providers and might be potentially positive for others depending on how it is implemented, according to a new report released today by Standard & Poor’s Ratings Services titled, “Will Massachusetts’ New Health Care Law Lead To Healthier Providers?”

“Our greatest concern for Massachusetts non-profit health care providers is that the bill will not effectively curb the overall cost of the uninsured,” said Standard & Poor’s credit analyst Jennifer Soule. “If the bill’s funding sources become insufficient to cover the true cost of healthcare for the uninsured, any additional financial burden on the state’s hospitals could damage their profitability, thereby potentially affecting credit quality.”

A provider’s savings will also depend on whether rising Medicaid and managed care organization reimbursement will effectively offset declines in receipts from the Commonwealth’s uncompensated care pool, according to the report. Naturally, those hospitals serving a higher indigent population are more positive about the law’s net effect than those with populations who are majority insured.

Standard & Poor’s does not believe that the sweeping health care reform bill (H. 4850), which Massachusetts Governor Mitt Romney signed into law on April 12, 2006, requires any immediate rating action for providers. Standard & Poor’s also does not think the law, which requires that all state residents obtain health care insurance by July 1, 2007, would be viable in other states.