Factors affecting credit rating downgrades of hospital revenue bonds.

This paper identifies the key institutional, operational, financial, and market-area factors associated with downgrades in the credit ratings of hospitals' outstanding, tax-exempt revenue bonds between 1985 and 1988. We examined data from 41 hospitals whose ratings had been downgraded from A to BBB by Standard and Poor's Corp., as well as data from 17 hospitals whose ratings had been downgraded from BBB to BB and lower, compared with hospitals having unchanged A and BBB ratings, respectively. The analysis found only two variables--the hospital's occupancy rate and its ratio of cash and cash equivalents to debt service payments--that were significantly associated with both types of downgrades.