Bucking a national ratings trend of downgrades exceeding upgrades, hospitals in New Jersey have demonstrated improvements in credit quality leading to a greater proportion of upgrades, according to Moody's Investors Service.
Moody's review of unenhanced bond ratings in New Jersey resulted in five upgrades, three downgrades and 15 confirmations, affecting a total of $855.3 million in outstanding debt.
According to the New York-based credit-rating agency, New Jersey hospitals have become more creditworthy since the 1992 deregulation of the state's reimbursement system. "The elimination of price controls, which contributed to severe undercollections of revenue, has enabled hospitals to build their cash balances and strategically prepare for increased managed-care penetration in the future as well as heightened competition," Moody's said.
Adjusting to the competitive environment and the lack of a financial safety net has posed new challenges for hospitals. The three downgrades, affecting $110.9 million in debt, generally reflect continued liquidity problems, Moody's said.
The debt ratings of Kimball Medical Center in Lakewood and Union (N.J.) Hospital and its rehabilitation and long-term-care unit were knocked below investment grade to Ba1 from Baa. Kearny-based West Hudson Hospital's rating dipped to Baa from Baa1.
The upgraded facilities, affecting $158.6 million in debt, demonstrated significantly improved liquidity and financial performance, the rating agency said. The upgraded facilities are Columbus Hospital, Newark, to Baa from Ba1; Kennedy Memorial Hospitals, Stratford, to A1 from A; Morristown (N.J.) Memorial Hospital, to A1 from A; Newton (N.J.) Memorial Hospital, to Baa1 from Baa; and Robert Wood Johnson University Hospital, New Brunswick, to A from Baa1.