More not-for-profit hospitals saw their credit ratings downgraded than upgraded in 2011, for the sixth consecutive year, according to a new report from Moody's Investors Service that reinforces a mostly gloomy outlook for the sector.
Credit downgrades outnumbered upgrades for sixth straight year for U.S. not-for-profits: Moody's
Moody's downgraded ratings for 34 hospitals, compared with 23 upgrades, and noted in the report that the opportunities for hospital executives to maintain margins will be difficult with the “low-hanging expense reductions already implemented.”
The ratings firm also said, however, that the overall volatility in hospital ratings slowed significantly, with the 57 ratings changes reflecting a 32% drop from 84 in 2010, and the number of downgrades was lower than the number has been in several years. Moody's said the lower volatility in ratings may continue in the coming years because many hospitals successfully shored up their balance sheets at the start of the recession, and if the wave of consolidation delivers the operating efficiency that hospital leaders expect it will.
Moody's concludes that many executives and board will have to take more dramatic action, such as eliminating service lines and “reshaping their model of healthcare delivery.”
Both Moody's and Standard & Poor's issued reports last week describing a negative outlook for not-for-profit hospitals in 2012.
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