Moody's: Urban hospitals face downgrades if Medicare funding is cut

One of the big fears hospitals face under reform is that Medicare rates will drop to even lower levels, worsening an already-difficult situation. That prospect also worries analysts at Moody's Investors Service, who say that urban hospitals with high overhead, in particular, could be hit hard by such changes, and possibly face downgrades in their debt ratings.

Right now, the 17 highest-cost hospitals found in a recent report by Dartmouth are based in densely-populated or urban areas. Such hospitals face high expenses for many reasons, including that they frequently offer money-losing, resource-intensive trauma care; that they run costly research programs; that they serve high-poverty areas and diverse populations with complex health needs; and that their regions often have higher costs of living.

These hospitals could face a crisis if deep Medicare cuts come with the final reform bill leaving Congress, Moody's notes. Meanwhile, hospitals which are part of multi-state systems, and enjoy economies of scale, are likely to do reasonably well under reform. While their costs aren't going to change much, they may very well snag more patients with health insurance than in the past, the agency said.

Get more background on the Moody's report:
- read this Reuters item

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