Advisories

Ratings Agency Recommends Adoption of Best Practices by Hospital and Health Systems

August 2005

In a special report issued August 9, 2005, Fitch Ratings stated its view that the Sarbanes-Oxley accountability and financial reporting requirements are "best practices" that should be voluntarily adopted by hospitals and health care systems.  In the report, Fitch predicted that regulatory bodies will move to enact legislation mirroring those of the Sarbanes-Oxley objectives which are applicable to not-for-profit organizations. The report noted that Fitch supports such reforms and cited the benefits of voluntary adoption of the applicable Sarbanes-Oxley provisions, which Fitch believes include increased accountability, strengthened governance, enhanced credibility with respect to financial reporting, and improved financial management decisions. Recognizing those benefits, the report observed that voluntary adoption of the applicable Sarbanes-Oxley provisions is particularly important among hospitals and health care systems, whose constituents often include investors, bond insurers, and credit enhancers. Moreover, voluntary adoption of Sarbanes-Oxley enables creditors to better assess an organization's creditworthiness, which may facilitate the organization's access to capital.