April 25, 2013 / 6:56 PM / in 5 years

Moody's downgrades 6 non-profit, mostly small hospitals

WASHINGTON, April 25 (Reuters) - Small, not-for-profit hospitals remained on shaky financial footing at the beginning of the year, with Moody’s Investors Service on Thursday saying it had downgraded more hospitals than it upgraded in the first quarter.

The rating agency downgraded six hospitals, five of which had less than $500 million in revenues. It also expects more downgrades in the second quarter.

“Almost all rating downgrades were small-sized providers continuing a trend we have seen for several years. Small hospitals are unable to absorb the reimbursement pressures facing the industry,” said Moody’s Associate Managing Director Lisa Goldstein, in a statement. “Two of the three upgraded providers have over $500 million in revenues and all demonstrated multiple years of improved financial performance.”

The credit rater warned in January that 2013 would be tough for the not-for-profit hospitals that often serve communities dominated by low-income families. It has had a negative outlook on the sector for five years, reflecting the hospitals’ swell of patients during and after the recession, as well as changes in how they are reimbursed by federal programs under the new healthcare law.

The hospitals have limited leverage, lack economies of scale and have an “over-reliance on a few key physicians” as well, Moody’s said on Thursday.

Still, the agency also affirmed 55 ratings and changed fewer non-profit hospitals’ ratings than in the first quarter of 2012.

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