Moodys Investors Service downgraded its outlook for investor-owned hospital companies over the next 12 to 18 months from stable to negative, saying that the weakening economy will hurt existing challenges with bad debt and weak volumes and cause a deterioration of the reimbursement outlook. Earlier this week, Moodys lowered its outlook to negative for not-for-profit hospital companies. The for-profit companies do appear, however, to have enough liquidity to see them through the tight credit markets, Moodys said. The companies also have room for cutting costs and scaling back capital expenditures to boost their cash.
Moodys said the for-profit chains have reaped the benefits of a strong reimbursement climate, with stable Medicare rates and substantial growth in commercial rates. Moodys expects Medicaid rates to be under pressure as states grapple with budget shortfalls. Commercial rates are mostly contracted for 2009, but they will come under pressure in future negotiations, Moodys said. -- by Vince Galloro