Moodys Investors Services revised its not-for-profit healthcare outlook for the worse thanks to the foundering economy and shaky financial markets. Moodys lowered its outlook to negative just two months after analysts described the sectors performance as stable for the coming year to 18 months. Since then, disruptions in the credit and liquidity markets have worsened and the prospects of a protracted recession have increased, according to Moodys.
Tumultuous debt markets have made it more expensive and more difficult to borrow, a significant problem for the capital-intensive healthcare industry, the report said. Tightened credit markets mean fewer banks that are willing or able to lend and investors who demand higher interest rates. Not-for-profit hospitals in short-term debt markets also face heightened risk that bonds must be rapidly repaid or that deals to hedge interest rates will go sour, analysts noted.
Stock market volatility in recent months rapidly compounded losses to investment portfolios that not-for-profits rely on for cash reserves. Poor investment performance may also force hospitals to pour more cash into defined-benefit pension plans. Broader economic threats include a growing number of uninsured patients, state cuts to funding for the safety net insurer Medicaid, and stress on revenue from private payers seeking to control costs and patients who delay care. Moodys analysts said mergers and acquisitions will likely increase, and capital projects may be delayed. -- by Melanie Evans