HMOS CAUSE SYSTEMS' RATING HITS: AND WHEN PLANS ARE SOLD, THE OUTLOOK MAY IMPROVE.

Modern Healthcare, February, 1999 by Moore, J. Duncan, Jr.

OSF Healthcare System in Illinois got an unpleasant reminder last week of the risks inherent in an integrated delivery system strategy. Standard & Poor's lowered the credit rating for the system's bonds to A from A .

The downgrade reflects weakened financial performance across the system, operating losses at five of the system's 10 hospitals, and "operating dilution from the nonobligated health plan," Standard & Poor's said.

The Peoria-based hospital system's wholly owned HMO, OSF Health Plans, lost $9.7 million in 1998, enough to drag the whole system into negative financial territory. Without the HMO, the hospital system would have been profitable, said Jennifer Neel, a Standard & Poor's analyst in New York.

OSF is only the latest hospital...

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