Fitch Ratings, New York, lowered its outlook to negative for the not-for-profit hospital sector. The nations year-long recession and plunging stock markets are expected to continue to stress hospital operations and investment returns. Hospitals that entered the economic downturn with weaker credit ratings have been more seriously affected, and analysts expect to see consolidation as struggling hospitals merge with stronger partners.
Jeff Schaub, Fitchs senior director in public finance, said that investment losses have hit balance sheets and eroded cash reserves used in key measures of not-for-profit healthcares financial strength. Uncompensated care and fewer patients have stressed operations in some markets, he said.
Budget deficits at the state and federal level are expected to strain hospital payments from publicly funded health plans, Fitchs revised outlook noted. The outlook was formerly stable. Hospitals will also continue to pay more to borrow for construction and technology investments in the near term. -- by Melanie Evans