Tuesday, July 24, 2012

Moody's Downgrades Nonprofit Hospitals

Moody's Investors Services maintained its negative outlook on the nonprofit health sector, announcing Monday that more hospitals received downgrades than upgrades, citing the down economy and federal budget cuts.

The credit rating agency said that the ratio of downgrades to upgrades was 1.33 to 1, according to Reuters. The hospitals that received upgrades were primarily due to strong management, high revenue from state provider taxes, and mergers. Overall, however, Moody's was not optimistic.

"The increased proportion of downgrades is driven by the continued slow economic recovery, increasing pressure on state budgets, and a large and growing federal deficit that may lead to reductions in Medicare and Medicaid which translate into weak volumes and revenue declines," Moody's said in a statement.

In a reversal from previous quarters, the dollar amount of downgraded debt for nonprofit providers exceeded the dollar amount of upgraded debt, $2.78 billion to $2.11 billion. Moody's said this was an showed an increase of downgrades for large health systems.

Finally, the agency said that the United States Supreme Court's decision last month to uphold the Affordable Care Act was a "neutral event" for nonprofit hospitals.

"Reductions and changes in Medicare and Medicaid reimbursements and funding will be negative in the long term due to expected cuts to these programs stipulated under the act," Moody's said.

You can read the full story on Reuters.

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