NU Online News Service, May 17, 11:51 a.m. – The U.S. health care industry appears to be improving financially, thanks to continuing demand, increasing prices and improving credit, according to a new report from Standard & Poor’s, New York.

The authors of the report, “U.S. Health Care Feeling Better,” conclude that the health care industry, with 28 ratings upgrades and 18 downgrades since early 2001, has fared better than most other industries.

Consolidation of diagnostic and medical product operations will have an important bearing on credit quality for these companies, says Michael Kaplan, an S&P health care credit analyst.

But other S&P analysts suggest problems might lie ahead for hospitals and pharmaceutical companies.

Although hospitals have seen stronger revenue and volume growth this year thanks to big managed care rate increases, the increases are not sustainable, the analysts write.

The largest U.S. drug companies continue to earn strong credit ratings, but the analysts warn the industry is headed for rough spots due to patent expirations, regulatory developments and tougher battles for new customers.

“Marketing has increased significantly as a major expense for drug companies,” Arthur Wong, an S&P credit analyst, says.