More hospitals and health systems saw their credit upgraded than downgraded last quarter by Moody's Investors Service. In a new report, analysts downplayed the rating activity that leaned heavily toward upgrades, saying reasons behind the higher credit were “various, idiosyncratic and do not reflect more entrenched negative credit trends facing hospitals.”
Analysts downplay spate of credit upgrades
One upgraded borrower's credit benefited from a merger, and three others saw credit ratings climb after California and Arkansas enacted provider fees used to increase Medicaid cash to be matched by federal funding, Moody's said.
The New York ratings agency upgraded 10 healthcare borrowers with a combined $2.1 billion in debt during the third quarter, compared with five downgrades that covered debt totaling $4.6 million.
Through the first nine months of the year, Moody's downgraded 23 healthcare borrowers and upgraded 18. Moody's said high unemployment, the chance of a recession, and constrained state and federal budgets will squeeze hospital revenue. Downgrades are expected to outpace upgrades for the year, the report said.
Fewer admissions contributed to two healthcare borrower downgrades last quarter, as did a drop in tourism for one New Jersey Hospital. Poor financial performance and a drain on cash prompted the downgrade of two others, Moody's said.
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