The financial outlook for some hospitals with lower bond ratings remains upbeat for the remainder of 1997, according to J.P. Morgan's latest Municipal Market Monitor.
But the news is not so rosy for hospitals in the Northeast and urban facilities.
Hospitals in medium to large cities and in the Northeast "continue to suffer from relatively unfavorable revenue mixes, competition from larger and financially stronger hospitals in their marketplaces and, among some of the more rural hospitals, an ongoing loss of patients," it says.
Since 1994, Robert H. Muller, managing director of municipal bond research at New York-based J.P. Morgan, has been monitoring the financial health of not-for-profit hospitals rated A or lower. His quarterly reports track a sample of 35 hospitals in large urban centers, small cities, suburbs and rural areas. As hospitals are acquired or merge, Muller tries to update his sample with comparable institutions.
His latest report, dated June 26, provides a glimpse of 34 lower-rated hospitals in the quarter ended Dec. 31, 1996. While year-to-year changes continue to show improvement, quarterly comparisons show "only slight improvement," the report notes. That's a sign year-to-year financial gains are going to be harder to come by, Muller writes.
For the quarter ended Dec. 31, sample hospitals' median net margin rose to 5.42% from 4.67% in the year-ago quarter. That margin also is an improvement over the quarter ended Sept. 30, when median net margin was 4.51%.
The number of hospitals reporting net margins above 7% remained unchanged from the previous quarter at 11. In the year-ago quarter, there were 10 hospitals that reported net margins above 7%. Meanwhile, seven hospitals had net margins below 2%, the same as in the year-ago quarter. But that is up from four in the quarter ended Sept. 30.