A.M. Best Company will rate U.S. hospitals and healthcare systems, beginning first with provider-owned health plans, the company announced Aug. 9.
Market demand has led A.M. Best into health plan ratings, said Senior Financial Analyst Christian Miles. The company has been rating insurance companies for 108 years, and currently rates some 650 insurance companies and 18 groups of health plans, Miles said.
The A.M. Best rating of healthcare systems and hospitals will provide interested parties such as consumers and insurance brokers with an issuer credit rating (ICR), or overall creditworthiness rating, based on the financial profile of an entire health system. If a health system's affiliated health plan is strong, that can boost the strength of the entire system in times of need, Miles said.
According to Miles, A.M. Best ratings can be used by health systems and hospitals to boost their branding image, establish a positive reputation in the community and to garner support for expansion efforts.
Organizations that want to expand into new product initiatives, geographic areas or other types of expansion, will be more likely to do so if their system has a strong rating, Miles said.
According to a statement released by A.M. Best, the ratings will be based on:
- comprehensive analytical research reports on rated hospitals and health-care systems
- the traditional credit market scale, based on conventional capital market standards
- meetings with a hospital or healthcare system's management
- a look at how a hospital or health system operates through various stages of the industry cycle
- consideration of the impact of affiliates and parent entities within a hospital or healthcare system.
The ratings will not be based on an organization's debt ratio, Miles said.
Quality of care will be factored into the ratings as part of the organizations' overall picture. "It's difficult to measure how quality of care relates to a financial rating, but it does play a role in stakeholder and consumers' perceptions," Miles said. A.M. Best will use government quality ratings and other quality awards to determine quality of care at an organization, he added.