Declining patient volumes and other bottom line pressures continue to pose a challenge for not-for-profit hospitals and there is no indication that things will get better any time soon, Moody's Investors Service says.
The bond rating agency reported 10 ratings downgrades affecting $2.7 billion in debt in the third quarter of 2013 that were due primarily to declines in admissions averaging 5.3% when compared with fiscal 2011-2012. Providers cite the ongoing shift away from admissions and toward reimbursement-draining observation stays as the key driver behind the decline, followed by rising co-pays and deductibles that are causing patients to defer medical care.
Moody's Senior Vice President Lisa Martin expects that downgrades will continue to outpace upgrades in the fourth quarter of 2013 for many of the approximately 500 not-for-profit hospitals and health systems that it rates.
"The activity that we are seeing is consistent with the outlook that we have on the sector, and one of the factors in our negative outlook for the sector is the decline in patient volumes," Martin says. "That is not the only reason but one of the main reasons for the rating downgrades in this last quarter. And in 2013 we are seeing large variations in volume trends and in some markets significant declines in admissions that are due to a number of different factors."