Standard & Poor’s (S&P) Rating Services recently warned the health care sector was at “a tipping point where negative forces have started to outweigh many providers’ ability to implement sufficient countermeasures.” S&P noted that for the past year, credit downgrades increasingly exceeded credit upgrades. Stand-alone providers are facing physician departures, rising bad debt, and higher employee benefit costs, all at a time when regulatory compliance requirements and technology upgrades also require significant attention.

“Hospitals have done a pretty good job cutting costs to deal with declining revenues,” said Martin Arrick, managing director at S&P. “But in the last year with the additional pressure of volume declines, it’s been the straw that is breaking the camel’s back.” To better weather the storm, numerous independent providers have turned to mergers with larger health systems as they “seek scale and efficiencies to offset increasing operating pressures,” S&P reported.