Moody's predicts uncertain future for New Jersey hospitals

Moody's Investors Service says New Jersey's not-for-profit hospitals have a rocky financial future ahead of them, with the likelihood that downgrades will outstrip upgrades over the next 12 to 18 months.

Moody's noted that after June 30, 2011--the end of the state's fiscal year--state government funding for the hospitals becomes more uncertain. That will force the management of some health facilities to make tough financial decisions.

"New Jersey hospitals that enact sustainable expense reduction measures to improve operating performance will likely be less impaired by ongoing operating and reimbursement pressures," said Moody's analyst Sarah Vennekotter in a statement. "We also anticipate more closures, payment defaults, or bankruptcy filings over the next couple of years by hospitals that cannot manage expenses and invest in long-term strategies," she added.

Moody's outlook for New Jersey's not-for-profit hospitals is negative, as it is for much of the rest of the country. However, the agency's median rating for hospitals in the Garden State is "Baa2," two notches below the national average of "A3."

Vennekotter noted the hospitals have below-average levels of liquidity, declining patient volumes and a difficult environment to bargain with insurers, among other factors.

"Even greater rounds of expense cuts will be needed to stabilize financial performance," she said.

For more:
- read the Wall Street Journal article
- read the Moody's press release