LifePoint Health Inc. Outlook Revised To Stable From Positive On Economic Fallout From COVID-19; Ratings Affirmed

  • LifePoint Health Inc., like many health systems, will likely be hurt by the ongoing coronavirus pandemic, as elective procedures are postponed and the public avoids nonemergency hospital visits.
  • We expect patient volume to decline materially, causing a decline in profit margins and cash flow, and thus do not expect LifePoint to sustain the financial profile, including cash flow, that would be consistent with a higher rating.
  • We are revising our outlook to stable from positive and affirming our ratings, including our 'B' issuer credit rating, on LifePoint.
  • The stable outlook reflects our current expectations for material business disruption from the pandemic as well as the possibility that, while we expect the disruption to be temporary, it may be difficult for the company to return to the credit profile that we expected for the higher rating in the next 12 months.
NEW YORK (S&P Global Ratings) March 25, 2020--S&P Global Ratings today took the rating actions listed above.
We expect the COVID-19 pandemic to materially decrease admissions, especially as elective procedures are cancelled or postponed and the public avoids non-emergency hospital visits.  We expect the lower admissions to harm EBITDA and cash flow for at least three months. While we expect pent-up demand for elective procedures to provide some relief after the pandemic, the timing and speed at which volume returns and the company returns to its pre-pandemic credit metrics is uncertain. Nevertheless, we expect LifePoint to have sufficient liquidity to sustain several months of stressed EBITDA and cash flows.
The stable outlook reflects our view that while the company will likely experience material EBITDA pressure over the near term, it has sufficient liquidity to sustain the pressure over the near term and we believe the company can sustain free operating cash flow to debt above 2.5%.
We could lower our rating on LifePoint if the company experienced large patient declines and did not experience a return to recent levels such that we expected free cash flow to debt to fall to and remain below 2.5% for an extended period.
We could raise our ratings on LifePoint if we came to believe that the company could sustainably generate at least $250 million in recurring annual free operating cash flow. An upgrade would also be predicated on our belief that the company intends to continue to deleverage to the high-5x area.
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