Moody’s Sees Mixed Outlook for Not-For-Profit Hospitals

Not-for-profit hospitals continued to experience credit deterioration during the first quarter of 2001, according to a report from Moody's Investors Service. However, the report notes that there are "hints of stability" in the sector, Moody's upgraded seven hospitals' ratings during the first quarter of 2001, after issuing no upgrades during first quarter 2000. The report notes that upgrade activity is related to "revenue growth due to a combination of successful payer contract negotiations and volume trends." On the other hand, Moody's downgraded the ratings of 19 hospitals, an increase from 16 during first quarter 2000. The report notes that the majority of hospitals downgraded were "lower rated, smaller, stand-alone providers," a reversal of a trend from 1999 in which downgrades affected higher-rated, multisite systems. The report states that Moody's does not project an improvement in hospitals' financial position or credit ratings, though the agency does "anticipate the ratio of downgrades to upgrades to be much smaller than over the last two years, going forward." Further, Moody's predicts that overall credit deterioration will continue, mostly as a result of nursing shortages, a possible economic downturn, a stock market reversal and "resumption of previously delayed capital expenditures that could lead to increased debt and decreased liquidity" (White et al, "Moody's First Quarter 2001 Update: Credit Deterioration Continues for U.S. Not-for-Profit Hospitals with Hints of Stability," April 2001). To obtain a copy of the report call Moody's at 212-553-1658.