Fitch Ratings - Barcelona / Paris / London - March 30, 2020: Fitch-rated healthcare entities in the Netherlands are enjoying some rating acceptance to withstand the short-term economic disruption caused by the coronavirus outbreak, but may be adversely affected if transmission rates rise and the epidemic continues.
We do not expect any immediate downgrade, although downside risks remain in our rating cases. However, the full impact of the Coronavirus is difficult to predict as the situation evolves. Severe shocks lasting more than a few weeks can put additional pressure on liquidity portfolios and cash generation, while potential spillover effects on financial markets can affect refinancing plans and aggravate liquidity problems and exert a significant negative pressure on issuer default ratings (IDR). Of the Dutch health entities classified by Fitch.
In its strategy to combat the Coronavirus, on March 15, 2020, the Dutch government took additional measures, closing schools and the hotel and sports sector until April 6. Schools and child care centers remain open to the children of primary sector workers, such as healthcare, law enforcement, public transportation, and emergency services. On March 18, the government called on former nurses and doctors to return to practice as the healthcare sector desperately needs more staff, including temporary employees, to cope with the coronavirus outbreak.
On March 23, the government took additional measures to combat the outbreak. He has offered a comprehensive package of support to the economy and said he will do whatever it takes for the health sector. Healthcare providers are facing rising costs and declining demand due to the postponements of some operations, so the government is consulting with these providers, as well as NZa (Dutch Health Authority), health insurance companies and municipalities .
Erasmus MC (AAA / F1 + / Stable) is rated from top to bottom.
Erasmus MC announced on March 25 that it will temporarily postpone some operations, unless they are urgent, to free up staff and family to admit COVID-19 patients. Erasmus MC receives many COVID-19 patients from the North Brabant province, as well as from other hospitals in the north of the country. However, since Erasmus MC specializes in complex care, you may have to delay fewer appointments, treatments or surgeries compared to leading general clinics or hospitals.
Fitch ranks the Erasmus MC program in descending order based on the Government Linked Entities (GRE) ranking criteria. The entity is credit linked and is equivalent to the sovereign ratings of the Netherlands (AAA / F1 + / Stable). This reflects the application of the four main ranking factors under the factors of correlation strength and supporting incentives. When the supporting rating is "robust", the main driver of the GRE IDR will be the supporting government rating. Therefore, the most significant impact of the Coronavirus on the Erasmus MC program comes from any change in the sovereign rating. The next review of the Netherlands sovereign rating is scheduled for April 24, in line with Fitch's 2020 calendar.
The independent credit profile (SCP) of Erasmus MC could be affected by possible changes in the assessment of its financial profile and, in particular, due to pressure on operating costs. However, your power consumption rate must degrade by 2 degrees to affect your IDR.
Fitch classifies the following healthcare entities based on:
Bullish, according to the classification criteria of the public sector and income-backed entities: Stichting Elisabeth-TweeSteden Ziekenhuis (ETZ) (A / F1 / Stable)
Stichting GGZ Noord-Holland-Noord (GGZ- NHN) (A / F1 / Stable)
Stichting Noordwest Ziekenhuisgroep (A + / F1 / Stable)
Zuyderland Group (A + / F1 / Stable)
Currently, a zero-to-two update is applied to these entities based on GRE standards.
Fitch believes that the most significant impact of the Coronavirus on the aforementioned entities will come from any changes in our defense assessments of their revenue, operational risk or financial performance; The most likely effect would be a significant increase in the ratio of adjusted net debt to EBITDA.
With the exception of GGZ-NHN (mental health care), the other three hospitals will be significantly affected in the short term due to having to postpone all non-urgent surgeries and send patients deemed fit enough to House. Emergency, oncology and obstetric care will continue. Hospitals requested additional assistance from qualified and registered nurses and physicians.
ETZ said it lacks volunteer staff (they generally have 276) because half of them are 67 or older and considered to be at risk. As of March 24, a third of COVID-19 patients live in the province of North Brabant, where ETZ is based.
Hospitals will not receive revenue for delayed operations if they are canceled. Hospitals are likely to face rising hiring costs as they turn to temporary staff to cover additional coronavirus cases and a shortage of volunteers. Additionally, hospitals will likely need to suspend capital spending plans. Fitch rates liquidity in the sector as "weak" and this could deteriorate if the epidemic continues for long. However, we hope that the government will continue to support the entire health sector.
The latest exporter data available for Dutch hospitals does not show that they are performing poorly; However, there are fundamental shifts in the revenue and cost profiles of the sector that are likely to be exacerbated as government restrictions persist or as economic activity expands and slows down.
Fitch Ratings are prospective. Fitch will monitor developments in terms of severity and duration, including qualitative and quantitative information adjusted for benchmark status and the rating based on performance expectations and an assessment of key risks.
Check out the Fitch Wire Coronavirus Pressing Quasi-sovereign Funds (March 25) for more information on the overall impact of the pandemic on GREs.
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