In the third quarter of 2013, Moody's Investors Service downgraded 10 nonprofit hospitals and health systems compared with eight upgrades.
Downgrades have outnumbered upgrades in each of the first three quarters in 2013, according to a report released today by Moody's. Downgrades also greatly surpassed upgrades in the fourth quarter of 2012.
So far in 2013, there have been 30 hospital downgrades compared with 18 upgrades. Roughly $10.3 billion of debt has been affected by downgrades, while only $4.8 billion of debt has been affected by upgrades.
Moody's analysts attributed the continuing trend of weakening nonprofit hospital credit profiles to several drivers. Reduced patient volumes factored into many of the downgrades, as hospital admissions shift toward observation stays. In addition, the rise of high-deductible health plans is forcing patients to shoulder more of the financial burden for their own healthcare, which is resulting in more bad debt for hospitals.
Hospitals and health systems that have received upgrades continue to show strong financial performance due to a dominant market presence and volume growth. Mergers and acquisitions have also positively affected larger credits, according to the report.
Moody's expects downgrades will outpace upgrades in the fourth quarter, as six hospitals are currently under review for a possible downgrade.
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