Honestly, the American Hospital Association has come across as a bit shrill of late, what with its shooting down just about every reform proposal coming from the Hill. Come on, guys, the time for change has come--whether you like it or not--and if you oppose every potential change, you'll have one rammed down your throat by an impatient Congress.
That being said, I think the AHA is right in asking Congress to include hospital bonds in a pending bill designed to help municipal bond issuers. After all, hospitals didn't start the domino cascade that effectively brought down the bond market. And no one can argue that hospitals are less necessary than banks to society, so rescuing them makes sense from a practical standpoint.
As it stands, the legislation would create a temporary federal reinsurance program for revenue bonds, a smart move given that instability in bond insurance has been a big factor in the bond market meltdown. It would also give the Federal Reserve the ability to provide "liquidity support" to state and local issuers' debt, such as variable-rate obligations.
In a letter written to Rep. Barney Frank (D-MA) earlier this month, the AHA argues that its members need debt support too. It notes that many hospitals are seeing sharp declines in unrestricted liquidity balances, and that some are on the verge of violating bond and liquidity covenants. The group contends that if the feds simply guaranteed its loans, hospitals could get back on their feet without a massive cash infusion (a welcome difference from the financial institutions, to be sure).
The bottom line, to me, is simple: Say what you like about the AHA's reform tactics, but it has a very good point when it comes to the bond market. I sincerely hope the House Finance Committee takes the group's request seriously, or there's likely to be a lot more carnage in the hospital industry--and that's something nobody wants. After all, even legislators get sick. - Anne