The credit quality of not-for-profit hospitals continued to slip in the second quarter, despite analysts' predictions that hospital finances will stabilize this year.
According to data compiled by Modern Healthcare, there were 30 downgrades affecting $5.5 billion of hospital debt in the second quarter. There were five upgrades affecting about $900 million of debt.
The ratio of upgrades to downgrades improved only modestly from last year's levels, which were among the worst ever. In the second quarter of 2000, the three rating agencies that evaluate healthcare debt issued 33 not-for-profit hospital downgrades affecting $5.6 billion of debt. Five upgrades in that quarter affected $581 million of debt.
Though many institutions have had stable or growing patient volume, most have been unable to improve their financial positions because of inflation (including staffing costs) and growing capital costs to accommodate higher patient volumes, Standard & Poor's said in a report released last week.
Still, analysts expect better news later in the year. Moody's analyst Christopher White said his agency noticed fewer downgrades among large hospital systems in the second quarter.
In the second quarter, Moody's downgraded 11 credits affecting $2.2 billion of debt and upgraded three affecting $790 million of debt. S&P downgraded 15 affecting about $2.3 billion of debt and upgraded just one, with debt of $25 million.
Meanwhile, Fitch reported four downgrades totaling $998 million and one upgrade of $78.3 million.