Moody's Investors Service downgraded slightly more not-for-profit hospitals and systems than it upgraded during the first three months of the year, a trend that's expected to continue, analysts said in a new report. Medicare cuts that took effect last October and the upcoming end to temporary federal Medicaid relief for state budgets will put pressure on hospital revenue, according to the report.
Moody's notes pressure from federal cutbacks
The New York ratings agency saw the fewest negative ratings changes in one quarter since 2002 with six credit downgrades and five upgrades. The quarter saw low overall rating change activity, which analysts attribute to hospital spending cuts. “The lower total level of upgrades and downgrades reflects the continued benefits of expense reductions mitigating revenue challenges,” the report said.
Hospitals and systems downgraded by Moody's struggled with weak revenue growth, declining cash reserves, increased leverage or issues with management and governance, according to the report. Analysts raised credit ratings at hospitals and systems that reported gains such as less debt, more cash reserves or strong or improved financial performance.
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