As was the case last quarter, more downgrades than upgrades are expected through the end of the year, said Moody's. “The continued effects of the economic downturn and slow recovery will continue to challenge financial performance” in the fourth quarter, likely leading to more downgrades, Moody's said, “as many hospitals have removed some of the less intense expenses and now must extract efficiencies from core operations and processes.”
Among the hospitals downgraded last quarter, some cited the weak economy as a culprit.
In Rahway, N.J., executives said the recession left the Robert Wood Johnson University Hospital with fewer patients and larger loses, prompting the 163-hospital to cut salaries in April, switch its group purchasing organization, and bring in turnaround consultants, Moody's noted when lowering the hospital's rating in September. A spokeswoman said in an e-mail that officials declined to comment on the recession and said the hospital was focused on its initiatives such as its “numerous and growing infrastructure improvements.”
Lakewood Hospital in Ohio, also one of the 11 hospitals downgraded by Moody's, cited the economy as one reason the Cleveland Clinic-affiliate saw a drop in admissions, its August ratings report said. A Cleveland Clinic spokeswoman said the economy continues to affect the hospital.
Meanwhile, some borrowers upgraded by Moody's bolstered operations with tight grips on expenses that analysts argue are unlikely to produce similar results in coming quarters.
Mount Sinai Medical Center in Miami Beach, Fla., reported a profit from its core clinical operations for the first time in a decade last year thanks to greater control over its expenses (and newly recruited heart surgeons), Moody's said in July. Mount Sinai officials were unavailable to comment, a spokeswoman said.
And HealthPartners, a three-hospital system based in Bloomington, Minn., froze hiring, used technology to cut administrative costs and moved patients through the hospital more quickly to improve performance in 2008 and 2009. HealthPartners also saw its admissions and health plan grow. HealthPartners Chief Administrative Officer Kathy Cooney said an upgrade would help “keep the cost of borrowing debt more affordable in the future.”