Reform Efforts Could Undermine Credit for Hospitals in Urban Areas

High-cost urban U.S. hospitals could see their debt ratings downgraded if current health care reform efforts include large cuts to Medicare funding, according to Moody's Investors Service, Reuters reports.

Research has found large variations in hospital charges in different regions (Linnane, Reuters, 11/23). Most of the 17 regions where Medicare spends the most per beneficiary are urban or densely populated areas (Evans, Modern Healthcare, 11/23). Such areas typically have higher costs of living, higher poverty and unemployment levels, diverse populations with varying health care needs and expensive research divisions.

The Moody's report states that health care reform efforts that include cuts to Medicare funding would affect hospitals "in different ways" but "could be especially negative for the credit position of many high-cost urban hospitals even if the number of insured patients expands."

Moody's officials said, "The most vulnerable hospitals [would] be stand-alone hospitals dependent on high-cost referral practices and which do not gain many new paying patients."

According to Reuters, facilities that are part of multi-state systems and have economies of scale or hospitals that gain the most new patients would fare best under health reform legislation that includes Medicare funding cuts (Reuters, 11/23).