Outlier policy among several challenges for N.J. hospitals: Moody's

The credit and financial profile of New Jersey hospitals has relapsed into a negative outlook, Moody's Investors Service said. Although hospital financials appeared to be on the rebound as recently as 2002, several challenges are worsening prospects, including an estimated $300 million reduction in revenue statewide because of new Medicare outlier regulations, Moody's said. Other challenges include cuts in charity-care programs, cash flow crunches as a result of greater managed-care penetration, and increasing costs associated with pensions and malpractice insurance. "Factors that appeared to be immaterial and even unknown six months ago have now become financial challenges for hospital management teams to overcome for the remainder of the calendar year and into the near future," Moody's Senior Vice President Pamela Federbusch said. Moody's rates 36 hospitals at 23 hospital organizations in New Jersey with $2.9 billion of outstanding debt. The median Moody's rating for those hospitals is Baa1. -- by Cinda Becker