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Moody’s downgrades small hospitals with lower revenues

NEWS IN BRIEF — Posted May 13, 2013

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In a Moody’s Investors Services report, the bond rating agency said in April that five of six hospitals it downgraded in the first quarter of 2013 are facilities that had less than $500 million in annual revenue, indicating financial vulnerability for smaller hospitals.

They are at a disadvantage compared with larger hospitals because they have limited leverage in negotiations with commercial payers, medical suppliers and other vendors, according to the report. The facilities lack economies of scale, which makes it difficult to gain efficiencies and maintain margins. They are overly dependent on key physicians, which makes them vulnerable if these physicians leave, according to the report.

Two of the three hospitals Moody’s upgraded in the report have more than $500 million in annual revenues. They also have showed improved financial performance because of growing patient volume and dominant market positions.

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