Are not-for-profit hospitals hitting bottom?


This week, not-for-profits got an additional helping of bad news, with ratings agencies Moody's and Fitch slamming their prospects over the next year or two. The ratings firms sang a familiar song: that with investment returns at an all-time low, uninsured patient volumes climbing and elective procedures dropping, hospitals were in for continued hard times.

At the same time, however, I do see signs, modest though they may be, that the not-for-profit hospital freefall may be starting to slow.

For one thing, this week we reported on at least one hospital system prepared to re-enter the bond market, albeit by paying a higher interest rate than it would have in the past. Raleigh, NC-based WakeMed, which has set plans to float a comparatively modest offering of up to $175 million, believes that market conditions have eased and that the bonds will actually find buyers.

Another hopeful sign is the fact that the Obama administration is very committed to healthcare reform. While there are obviously many ways to go about reform efforts, my guess is that the Massachusetts model of expanding at least bare-bones coverage to everyone will serve as a good example. And that may very well mean less bad debt for hospitals.

I also believe that investment returns will improve, as they've got virtually nowhere to go but up. After all, if nothing else, the stimulus package being kicked around on the Hill will eventually help stabilize market-mover companies, which is likely to push portfolios up higher. (Yes, the stimulus bill is being savaged in the Senate, but even if it takes another go-round, my guess is that something will get through Congress eventually given the crisis we're in.)

I admit that these are somewhat wispy indicators, but to my way of thinking they're a reasonable basis for hope. However, you may not agree. What do you think? Are we seeing very early signs that the worst is over for not-for-profit hospitals, or are these too insubstantial to count? Write to me and let me know. - Anne

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