NCPA - National Center for Policy Analysis

Rocky Finances At Nonprofit Hospitals

July 15, 1999

Moody's Investors Service predicts more bankruptcies among nonprofit hospitals of all sizes throughout the nation. Credit downgrades among nonprofit hospitals accelerated in 1998 and the trend continues this year.

  • Currently, 35 nonprofit health providers -- just over 7 percent of those rated by Moody's -- have debt rated in speculative or junk categories.
  • Those ratings cover about $2 billion in outstanding debt.
  • Hospitals originally got into trouble because of poor management, competition, being located in poor communities and spending too much capital on improvements, Moody's research indicates.
  • While those are still problems, many of the larger, urban hospitals are also "reeling from the impact" of failed aggressive growth strategies -- such as merging, purchasing doctors' practices and signing more contracts with managed care insurers.

Others blame overcapacity for the struggles of some hospitals. Fewer beds are needed as technology and managed care reduce the time patients spend in hospitals.

Source: Julie Appleby, "Report: Financial Ills Will Infect all Sizes of Hospitals," USA Today, July 15, 1999.


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