Upgrades outflanked downgrades in the healthcare sector in the fourth quarter of 2014, according to a new report from Moody's Investors Service.
Healthcare was one of several sectors where upgrades exceeded downgrades in the fourth quarter, according to the report, along with housing, states and infrastructure. Downgrades outpaced upgrades in higher education and local government.
"While downgrades continued to exceed upgrades in 2014, the percentage of downgrades decreased quarter-over-quarter, save one," author of the report and Moody's Analyst Mark Lazarus said in a statement. "We attribute the growing share of upgrades to economic and financial stabilization across most public finance sectors and expect the favorable trend to continue."
The upgrades in the healthcare sector were driven by consolidation among not-for-profit hospitals, according to the report, leading to upwards ratings revisions for Florida's All Children's Hospital and Michigan's Oakwood Obligated Group. Overall, there were 10 upgrades in the quarter compared to three downgrades. For all of 2014, however, the sector saw 37 downgrades compared to 28 upgrades, and the ratings agency projects downgrades will exceed upgrades in the sector for 2015, driven largely by pressure on revenue sources.
An August 2014 report from Moody's found that revenue growth at nonprofit hospitals was at its lowest growth level since the 2008 recession, growing only by 3.9 percent in 2013, FierceHealthFinance previously reported. "We expect revenue growth will remain under pressure in 2014," Moody's Analyst Jennifer Ewing said at the time. "We expect continued financial weakening due to volume declines in a predominantly fee for service environment, reinforcing our negative outlook on business conditions for not-for-profit hospitals."
However, this week the ratings agency also announced it has upgraded its rating for the healthcare sector from negative to stable, FierceHealthPayer reported, although Moody's expressed concern about healthcare costs such as higher deductibles and out-of-pocket expenses.