The decision process used for hospital bond rating--and its implications.

Investigation of the process of hospital bond rating related the ratings assigned by Moody's and Standard and Poors to indicators of hospital financial condition (such as debt per bed and peak debt coverage), institutional factors (including size, occupancy, and local market competition), indenture provisions (such as reserves), and contextual factors. The criteria used by Moody's and Standard and Poors to rate hospital bonds were revealed to be similar, but not identical. Criteria used in the bond rating process have several important implications: the rating approach provides strong financial incentives for increases in hospital size and complexity, for example, and hospitals that rely on extensive amounts of public financing appear to be penalized in the rating process.