Health Care Industry Remains Unattractive to Lenders

The Journal of Lending & Credit Risk Management, May 2000 | Go to article overview

Health Care Industry Remains Unattractive to Lenders


The health care industry continues to be held in low esteem by 84% of lenders responding to this quarter's Phoenix Lending Survey. It is the fourth, consecutive quarter the industry has led the list of least attractive industries to lenders.

The 86 lenders participating in the February survey echoed the attitudes of last quarter, when 85% said they would not lend to a health care concern. That 85% was the lowest grade any industry has ever received from lenders since the survey was begun in 1995.

"The prognosis for the health care industry remains grim," said E. Talbot Briddell, president of Phoenix Management Services, a Philadelphia-based turnaround management firm. "There are very few signs of life among the varied sectors that make up the industry."

Lenders were particularly disenchanted with managed care companies (named by 55% of respondents as unattractive), not-for-profit hospitals (48%), and for-profit hospitals (45%). When asked which sectors of the health care industry were appealing to their lending institution, lenders' highest vote--41%--went to pharmaceutical companies, followed by durable medical equipment suppliers, named attractive by 39% of lenders.

Lenders Optimistic About Economy

Despite the gloom bestowed upon the health care industry, lenders overall were more optimistic about the economy than they have been at any other time in the last year. Respondents upgraded their prediction for the economy's performance during the first six months of 2000 to a B-, up from B-C/+ grade they gave it last quarter.

Lenders also reported their customer's growth plans are more aggressive than they were a quarter ago. Half of respondents said their customers were expecting "very strong" or "strong" growth in the coming year, compared to 30% who said that last quarter.

Commercial customer's borrowing prospects may be brighter than they were three months ago, according to lenders. …

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