DOWNWARD SWING /
Moody’s saw the worst ratio of downgrades to upgrades for not-for-profit hospital credits, the worst since the first half of 2009.
Moody’s Investors Service downgraded 12 not-for-profit hospital credits in the second quarter compared with only three upgrades, the worst such ratio since the first half of 2009, according to a special comment published by the bond-rating agency. The total value of debt outstanding for the downgrades was $2.63 billion vs. $1.42 billion for the upgrades, marking the first time that downgrades have outpaced upgrades on total debt value since the third quarter of 2009. Moody’s noted that it affirmed ratings for 81 not-for-profit hospital credits in the quarter, representing 84% of its ratings activity for the quarter and consistent with the long-term trend for the vast majority of ratings actions to result in no change. For the second quarter and the first half of 2011 as a whole, debt issuers with $500 million in annual revenue or less were disproportionately hit with credit downgrades, Moody’s said. Such issuers were eight of the 12 downgrades, or 67%, for the second quarter; and 13 of 18, or 72%, for the first half. Issuers with less than $500 million in annual revenue are more vulnerable to physician departures, lack leverage with insurers and lack the scale needed to drive down costs enough to maintain margins in the current environment, Moody’s said. The quarter’s three upgrades represented the fewest number of upgrades in the sector since the third quarter of 2005, Moody’s said. possible are not affected,” but that it’s important to consider changes in later years to ensure the program’s sustainability. “What we’re not willing to do is restructure the program in the ways