Moody's nonprofit hospital outlook bleak

Moody's Investors Service says downgrades for not-for-profit hospitals outstripped upgrades by a four-to-one margin during the second quarter of 2011, suggesting that any gains made in the recent economic recovery are beginning to slip away.

New York-based Moody's issued 12 downgrades and only three upgrades during the quarter, and does not expect a reversal anytime soon. Most of the downgrades came among smaller or independent hospitals with $500 million or less in annual revenue.

The downgraded debt totaled $2.6 billion, compared to $1.4 billion in upgraded debt.

"The trend in favor of downgrades has not been this strong since the first and second quarters of 2009 at the height of the credit crisis," said Moody's Associate Analyst Jennifer Ewing in an announcement. "We also predict more downgrades than upgrades in the second half of 2011, particularly for smaller independent hospitals."

Ewing attributes the decline to continued high unemployment, cuts in government funding, and a very slow economic recovery.

The three upgrades were a fraction of the 15 reported during the first quarter of 2010. The number of upgrades have been steadily declining since then.

For more:
- read the Moody's announcement