S&P snips NAPA

S&P said it lowered its ratings for ASP NAPA Intermediate Holdings LLC and its first-lien debt to B- from B.

“NAPA's margins are pressured by significant inflation in anesthesiologist compensation in 2022 (estimated at above 10%) and 2023 (in the high-single-digit percent area). This increase in labor costs significantly outpaces the increases in the reimbursement NAPA receives from both government and commercial insurance payors, generally in the low-single-digit percent area or worse,” S&P said in a statement.

The company has been successful in renegotiating contracts at many of its client hospitals. “We expect NAPA to improve margins over the next 12-18 months even without further divestiture-like fees. Given the essential nature of the company's services to hospitals and its track record of successfully negotiating cost-plus contracts at almost half of its hospital customers, we expect the company will remain successful in its efforts to renegotiate the remaining contracts. We also expect its margins to improve from the termination of some EBITDA-negative contracts and due to a reduction in operating expenses after it transitioned to a single revenue cycle management platform,” the agency added.

The outlook is negative.

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