Hospital Bankruptcies to Rise, Moody’s Says

U.S. not-for-profit hospitals will suffer more bankruptcies and defaults over the next several years, and large urban facilities are no longer immune, Moody’s Investors Service said. “We expect more bankruptcy filings to occur as hospitals are unable to make bond payments and seek relief from creditors,” said Lisa Goldstein, an analyst at Moody’s and author of a new report on the problem. Goldstein said part of the blame goes to overly aggressive expansion efforts that in some cases make hospital systems unwieldy and slow to reform. Government aid cutbacks are another sore spot. The report says the trend will show itself over the next few years as more hospital credit ratings drop into the speculative-grade, or junk, category. In fact, rating downgrades into the junk range have already begun escalating. Of the 480 public finance health-care ratings that Moody’s maintains, 35, or more than 7%, are already speculative grade, meaning they fall between single-C and Ba1 on the Moody’s rating scale. That represents about $2 billion of outstanding hospital debt rated by the agency. Moody’s also said in its report that some facilities are bucking the trend. Eight ratings moved from junk back into the investment-grade ranks over the last year.