Not-for-profit hospitals financially stable in '07, says Moody's

Anne Zieger — Fri, 22 Aug 2008 05:27:47 -0400

Though some big threats continue to loom, things weren't too bad for not-for-profit hospitals in 2007, despite the subprime mortgage-fueled financial markets meltdown, ongoing problems in the U.S. economy and continuous pressure on margins, according to financial industry ratings firm Moody's Investors Service. After reviewing audited fiscal 2007 financial statements for 410 non-profits, the firm concluded that operating performance and liquidity remained stable for non-profits last year. A total of 77 percent of Moody's rated not-for-profit hospitals and health systems reported operating profits, too. This is a bit of a turnaround from a report issued by Moody's just a few months ago which, as we read it, was rather pessimistic even about non-profits' near-term health.

That being said, fiscal '07 was the second consecutive year in which the median expense growth rate exceeded the median revenue growth rate. Worse, median expenses exceeded revenues despite the fact that expenses fell to 7.4 percent for fiscal '07, down from 7.8 percent in fiscal '06. Meanwhile, margins softened, though they were still decent compared with historical levels, Moody's noted. Median operating margins hit 2.1 percent in 2007, down from 2.3 percent in 2006. Median operating cash flow dropped too, to 9 percent from 9.2 percent. Despite these pressures, median capital spending ratios--additions to capital equipment and other properties divided by depreciation--climbed to 1.52 times, up from 1.45 times the previous year.

To learn more about Moody's report:
- read this Modern Healthcare piece (reg. req.)

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S&P to monitor non-profit hospital tech spending

Wed, 14 May 2008 06:59:58 -0400

Over the next few years, credit rating firm Standard & Poor's plans to take a much closer look at the extent to which not-for-profit hospitals keep up with their peers in making technology investments while keeping finances otherwise in order. In fact, investment in advanced medical technology will be a key factor differentiating those with good and poor credit ratings, the firm said.

That being said, a strong technology investment program won't impress S&P all by its lonesome. The firm says it's going to look carefully at whether a hospital's medical technology investments made sense and what impact they had. Generally speaking, the firm warned, it still expects that given the pressures on the industry, hospital credit downgrades probably will outnumber upgrades in 2008, and possibly into 2009.

To learn more about S&P's plans:
- read this Modern Healthcare article (reg. req.)

Related Articles:
Moody's shows little enthusiasm for non-profit hospital finances
Health IT plans affect financial ratings
Ratings firms slam nonprofit hospital finances
Crisis may change tax-exempt bond rating system

non-profit hospitals

Not-for-profit hospitals financially stable in '07, says Moody's

S&P to monitor non-profit hospital tech spending