NOT-FOR-PROFIT HOSPITALS: Moody’s Sees ‘Gloomy’ Outlook

      The financial outlook for not-for-profit hospitals remains "gloomy" and is unlikely to improve over the next few years, Moody's Investors Service said yesterday. The bond-rating agency has downgraded bond ratings on 38 not-for-profit hospitals and health systems so far this year, while raising ratings for only two, the Philadelphia Inquirer reports. The agency rates more than 500 not-for-profit hospitals with about $72 billion total in outstanding debts, and while the average rating is currently A3 -- the lowest rank in the "upper medium grade" category -- that average is slipping a notch lower, to Baa1, or medium grade. Moody's notes that along with the "endemic" problems of federal and private reimbursement declines and difficulties associated with hospital mergers, new short term challenges include a nationwide nursing shortage and rising pharmaceutical costs. Some hospitals are also losing revenue as specialty hospitals "pick off" more lucrative services such as open-heart surgery and orthopedics. Although Moody's primarily examines hospitals' ability to pay off debts, some experts also note that patients could "feel the squeeze as well" if hospitals are unable to fund capital improvements. "If the hospital can't borrow money to upgrade, the patient will probably find something he doesn't like. Hopefully it won't be a matter of life or death, but just something like how fresh the paint is, or how modern the equipment," Mark Pauly, a health care economist at the Wharton School, said (Knox, 8/22).