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Global Credit Research - 04 Dec 2012
New York, December 04, 2012 -- Children's hospitals will face increasing revenue challenges as
healthcare reform moves forward, says Moody's Investors Service.
In the new report, "Children's Hospital Medians Indicate
Growing Revenue Challenges," Moody's says children's
hospitals will continue to benefit from limited competition for their
unique and essential services, as well as from their developed fundraising
capabilities, but the advantages they have traditionally enjoyed
over adult hospitals in terms of credit quality will narrow.
Moody's identifies revenue pressure from rate reductions or lower
rate increases from both private and governmental payers as the greatest
credit risk facing children's hospitals. This risk is the
main driver of Moody's negative outlook on both adult and children's
not-for-profit hospitals, but children's hospitals
are especially vulnerable given a high dependency on Medicaid funding
at a time when state budgets are stressed and additional Medicaid cutbacks
Health reform is likely to have more of a negative impact on the children's
hospitals than on the adult hospitals, says Moody's.
"Like adult hospitals, children's hospitals will face
cuts in disproportionate share funding," says Lisa Martin,
Senior Vice President at Moody's and lead author of the report.
"However, children's hospitals will not benefit as much
as adult hospitals from more insured patients that health reform should
bring because a larger proportion of children are already insured through
Medicaid or the Children's Health Insurance Program."
There has already been some tightening in the spreads between median credit
metrics for adult and children's hospitals. For example,
in 2007 the median revenue growth rate for children's hospitals
exceeded that for adult hospitals by almost 3%; by 2011 the
gap had narrowed to 0.7%.
The medians also show that in 2011 the median expense growth rate for
children's hospitals exceeded the revenue growth rate for the first
time since 2008, a signal of growing operating pressure.
Moody's currently rates the debt of 22 children's hospitals,
totaling over $7 billion. The median bond rating for Moody's-rated
children's hospitals is A1, compared with A3 for all adult
For more information, Moody's research subscribers can access
this report at http://www.moodys.com/research/Childrens-Hospital-Medians-Indicate-Growing-Revenue-Challenges--PBM_PBM147893.
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Senior Vice President
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
John C. Nelson
MD - Public Finance
Public Finance Group
Moody's: Children's hospital medians reveal growing revenue challenges
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
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