Citibank says hospital sector's health improving

Despite the constant drumbeat of negative news plaguing the hospital sector, it seems that Citibank analysts see more good than bad in the industry's financial position.

This week, Citigroup raised its hospital sector rating, citing labor costs savings due to the rounds of layoffs that have taken place over the past several months. These savings, analysts say, have lowered 2009 earnings risk. What's more, they say, possible financial gains from healthcare reform haven't even been accounted for, yet.

With headcount reductions and wage freezes in place at hospitals, they've been able to beat market expectations during the first quarter of this year, notes analyst Gary Taylor, who upgraded the sector to "overweight" from "equal-weight."

And with labor costs at a new low, hospitals should be able to cope with higher bad debt rates that are still expected to hit them in the second half of the year, Taylor said.

To learn more about the upgrade:
- read this Reuters report

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