Credit rating agencies to assess NHS providers

26 January 2012

New research from the think tank IPPR has revealed that the government is planning to use credit rating agencies like Standard & Poor's, Moody's and Fitch to assess public and private providers of NHS services.

However, IPPR warned of a potential conflict of interest and highlighted the poor track record that credit rating agencies have in identifying risk, having rated Lehman Brothers as investment-worthy on the morning of its collapse.

IPPR associate fellow Joe Farrington-Douglas said: "Government and regulators should be looking at how to embed responsibility and ethics in healthcare organisations, rather than importing the institutions and values that were implicated in the greatest market failure for 80 years.

"One of the government's main arguments for its current reforms to the NHS is that they are necessary to meet the economic challenges which stem from the financial crash of 2008. But by directly drawing on the failed models and institutions of pre-2008 economics the reforms fail to learn from recent history. They even bring into NHS regulation the same credit rating agencies that were implicated in the sub-prime bubble, collateralised debt obligations and the collapse of Lehman Brothers, with potentially serious consequences for our health system."

He continued: "Credit rating agencies do not have a health, let alone an NHS, perspective and are by definition interested solely in financial bottom lines. They are not equipped to ask any questions about the ethics or compassion of health care providers or to review whether the central purpose of the health service – to deliver good quality health care to those in need – is being delivered. Credit rating agencies will boil down these issues into a three letter assessment of how good a prospect they believe a providers is for a profit-seeking private investor."