Credit deterioration of not-for-profit hospitals slowed in the first quarter of 2001, said Moody's Investors Service, noting a significant increase in upgrades.
In addition, the bulk of downgrades shifted from big systems to small, lower-rated providers, the ratings agency said.
Despite the good news for hospitals whose ratings improved, Moody's isn't expecting an industrywide turnaround.
Looming threats include a nursing shortage, a possible economic downturn and corresponding reimbursement reductions, a stock market reversal that could pose liquidity problems and a resumption of previously delayed capital expenditures, Moody's said.
Downgrades of not-for-profit hospitals continued to outpace upgrades for the 11th consecutive quarter. Moody's lowered its ratings on 19 hospital credits affecting $2.8 billion of debt, compared with 16 downgrades affecting $4.6 billion of debt in the first quarter of 2000.
The first quarter, however, also produced the highest number of hospital upgrades in a single quarter since 1998, Moody's said. There were seven upgrades affecting $1.2 billion of debt, compared with no upgrades during the first quarter of 2000.
The sector's A3 median rating stands.
Analyst Christopher White said 63% of providers downgraded in the first quarter of 2001 were rated Baa or lower, in the bottom half of credit quality. "This is a complete reversal from last year's comparable period which saw 62% of downgrades affecting credits rated A and higher," White said.
Moody's rates more than 520 not-for-profit hospitals and healthcare systems with about $90 billion in total outstanding debt.