Hospital credit downgraded – Labor costs, reduced payments cause problems

Moody’s Investors Service lowered the credit ratings on 28 nonprofit hospitals and health-care systems during the first half of 2000, Bloomberg reported July 6.

The current credit downgrades are part of a larger trend, and reflect a number of pressures on the health care providers. Reduced reimbursements from governments and managed health care plans, as well as rising labor costs, have weakened the sector.

Moody’s said it expects to downgrade more health providers in the coming quarter than it did in the third quarter of 1999. Yesterday alone, Moody’s lowered ratings on more than $1 billion of hospital debt.

More than half of this year’s downgrades affected health providers rated “A” or higher. Last year Moody’s mostly downgraded “Baa” issuers.

“This reflects the continued decline in credit quality that we have seen among the larger hospitals and systems and not just the smaller, independent hospitals” that face a competitive advantage, said Kevin Ramundo, senior vice president of Moody’s, in a statement.

For full story, see America Online.

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