S&P cuts Team Health

S&P said it cut its ratings on Team Health Holdings Inc. and its senior secured debt to B- from B and on the unsecured debt to CCC from CCC+. The recovery ratings on the debt remain 3 and 6, respectively.

“The downgrade reflects our updated expectations of increased pressure on growth and margins, potential further pressure from the company’s dispute with UnitedHealthcare, and the elevated spending on legal and advocacy costs. Team Health is experiencing declining patient volumes that translate into smaller same-unit net revenue increases, weaker EBITDA margins, and lower cash flow,” said S&P in a press release.

The conflict with United further weakens S&P’s belief that Team Health will be able to reduce its leverage from the current double-digit levels. Supporting this view is Team Health’s lack of meaningful organic growth since price increases might not be enough to offset volume declines, S&P said.

The outlook is stable.

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