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LifePoint Health Credit Ratings and Outlooks Signal Additional Challenges for its Virginia Hospitals

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LifePoint’s Sovah Danville Hospital

by James C. Sherlock

One thing I watch about companies in industries I cover is the ratings and outlooks on their credit.

In my experience, the SEC’S three largest nationally recognized statistical rating organizations (NRSROs), Moody’s, S&P, and Fitch, tend to know as much about company finances as their boards do.

Sometimes more.

I recently wrote about management and staffing issues at Sovah Health hospitals in Danville and Martinsburg. Both are owned by privately held LifePoint Health, headquartered in Tennessee.

Lifepoint also owns in Virginia:

  • Fauquier Hospital;
  • Clinch Valley Medical Center;
  • Twin County Regional Hospital; and
  • Wythe County Community Hospital.

The rating agencies are not in love with LifePoint’s credit.

Yes, it matters.

S&P Global Ratings affirmed the B credit rating of LifePoint Health long term debt on January 10, 2023.

The S&P outlook on that debt is negative.

Moody’s rates LifePoint B2 with the outlook also assessed as negative. In Moody’s rating system, B2 is the second level of “speculative” and the second level of “subject to high credit risk.”

Moody’s assessed in March that the global speculative-grade corporate default rate will rise to 4.6% by January 2024. Firms with negative outlooks on their ratings are more likely than the rest to be part of that 4.6%.

By contrast, Sentara, Inova, Valley Health, HCA, and Carilion are all rated investment grade with stable outlooks.

Bottom line. There is always a market for speculative debt, even with a negative outlook, but LifePoint Health is discovering the very high costs.

It is a situation with a bearing on those six Virginia hospitals.

Financial issues signaled by the speculative rating on its credit and, separately, LifePoint staffing shortfalls in Virginia discussed in my earlier article show a need for additional oversight of those hospitals.

When corporations get into financial and staffing trouble, they must make their own way out of it.

But the regulator of LifePoint’s Virginia hospitals, the Virginia Department of Health, must step up to ensure patient safety while that company attempts to do so.

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15 responses to “LifePoint Health Credit Ratings and Outlooks Signal Additional Challenges for its Virginia Hospitals”

  1. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    Why is LifePoint Health in such a precarious situation when Virginia hospitals, in general, had recent banner years with the federal COVID subsidies? I understand the staffing problems, but not the financial ones. Realistically, what can the Dept. of Health do?

    1. James C. Sherlock Avatar
      James C. Sherlock

      Excellent questions.

      The financial reports that were recently posted by vhi.org and on which I reported were from FY 2021.

      In 2021, healthcare companies were borrowing for basically nothing if they had to borrow at all.

      I noted that in that report that FY 2022 was a different story.

      The only place that I can to go to find out the current financial status of these companies is the NRSROs, which I have done for the story above.

      The Department of Health (VDH) is the state’s hospital regulator. The VDH Office of Licensure and Certification (OLC) is also the state survey agency for the U.S. Centers for Medicare and Medicaid Services.

      Kim Beazley, who runs OLC and upon whom I have reported before, is in my opinion a terrific public servant. Her office too is very understaffed as I have reported twice previously.

      Virginia law, § 32.1-125.1. Inspection of hospitals by state agencies generally restricts inspection periodicity, but permits additional inspections “to the extent necessary to ensure the public health and safety”.

      OLC has to prioritize. I suggest that the data point to the fact that they should prioritize LifePoint hospitals.

      With the information I have provided in my two articles, OLC can and should put LifePoint hospitals under watch and provide regular, unannounced inspections as required to ensure patient safety.

  2. Nancy Naive Avatar
    Nancy Naive

    That just says they’re not investment grade. You can still die there, or maybe even recover.

    US Healthcare System — Not healthy, not caring, nor a system.

    1. Nathan Avatar
      Nathan

      “US Healthcare System — Not healthy, not caring, nor a system.”

      So I guess you would prefer something along the line of what’s in Canada?

      15% of Canadians satisfied with access to care, while 29% of Americans satisfied with access, poll finds

      Faced with the possibility of needing emergency care, 70 per cent of Americans felt confident they would get it in a timely fashion compared to just 37 per cent of Canadians.

      https://www.cbc.ca/news/health/canada-health-care-access-1.6574184

      But maybe Canadian health providers “care” more, even as they let people die.

      I know someone from Canada who survived a medical emergency, only because she lives near the border and was able to get help in the U.S.

      1. Nancy Naive Avatar
        Nancy Naive

        That just says 1) more Canadians avail themselves of their system than Americans of theirs, or 2) Canadians are smarter than Americans.

        How does she know that? Did she go back home, have another identical medical emergency and then die in a Canadian hospital?

      2. Nancy Naive Avatar
        Nancy Naive

        That just says 1) more Canadians avail themselves of their system than Americans of theirs, or 2) Canadians are smarter than Americans.

        How does she know that? Did she go back home, have another identical medical emergency and then die in a Canadian hospital?

        Average life expectancy in North America for those born in 2021, by gender and region (in years)
        Characteristic Males Females
        North America 75 81
        Canada 80 84
        USA 75 80

        1. Nathan Avatar
          Nathan

          Sure. Interpret it that way if it makes you feel better.

          There’s no convincing an ideologue. Watch the video for an example of that.

          A Vancouver man has placed an ad offering a $5,000 reward to anyone who can help him find a family doctor.

          http://www.cbc.ca/player/play/2068280899941

          1. Nancy Naive Avatar
            Nancy Naive

            Wow! That’s horrible! 1M people in British Columbia don’t have a family doctor. There’s 5M people in BC. 20%.

            Now what percentage of Americans don’t have a family doctor? Go ahead, look it up.

            It’s 1 out of 3. Mostly children. But you knew that.

          2. how_it_works Avatar
            how_it_works

            Much easier to go the ER than to make an appointment with a family doctor.

          3. Nancy Naive Avatar
            Nancy Naive

            Definitely faster…

          4. how_it_works Avatar
            how_it_works

            I know a guy who made 60 trips to the emergency room in a single year.

            He’s on Medicaid…and dumb as a box of rocks.

            I seriously wonder what went wrong for society to produce someone like that.

          5. Nathan Avatar
            Nathan

            When viewed from afar, there are various ways of interpreting some statistics relating to people, and the circumstanced they find themselves in. If, however, one has personal knowledge, the problem sometimes becomes apparent.

            I have personally dealt with dysfunctional people including family. In spite of great effort on my part, eventually I realized that with some individuals I couldn’t significantly impact the trajectory of their lives. That was hard to accept, but it became an unavoidable conclusion over time.

            That realization helped me to choose a career where my job was fixing things rather than people. Technology is complex, but at least there are ways to fix things that don’t work.

          6. how_it_works Avatar
            how_it_works

            Some folks, you try to help them, and they’ll pull you right down into their pit of dysfunction.

            Some folks have to learn the hard way. Others never learn.

          7. Nathan Avatar
            Nathan

            Wow, there are patients in Virginia advertising for a doctor because they can’t find one? Really?

            In the private sector, when demand increases, so does capacity, unless there are external constraints.

            But you knew that.

  3. david Beauregard Avatar
    david Beauregard

    The challenges encountered by LifePoint in managing its’ Virginia hospitals are numerous. With the exception of Fauquier Hospital, these are smallish rural facilities in communities that have experienced declining population, declining industries (furniture, coal) and a declining ability to attract the management or clinical leadership needed to reposition these hospitals for alignment with emerging payment programs such as value-based care. They are dependent upon Medicaid for a large part of their revenues. They are likely receiving 75% of their costs from Medicaid. Medicaid accounts for 50% of their patient load. That is a situation where 50% of your patients are insured and paying less than cost to deliver the services they need. The hospitals are also forgiving the unpaid medical debts of some of those using their facilities who are daily making the choice between heat, food, clothing and fuel for the family car. The health populations of these communities tend to be sicker and more expensive to care for. Rural healthcare has been under siege since the early 1970s. We are operating a rural health system that no longer meets the health needs of the communities they serve. Economic development has ceased and work forces have declined in health and are aging. A new business model must be developed and funded. Finally, it is absurd to compare LifePoint with Sentara, INOVA, Carilion or UVA and MCV. Those are modern, expensive health systems with deep management, financing and leadership capabilities. We cannot afford those hospitals any more than we can afford failing rural health systems,

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