The Associated Press August 26, 2010, 11:40AM ET

Moody's: Negative view on not-for-profit hospitals

Moody's Investors Service on Thursday gave not-for-profit hospitals a negative outlook, saying improvements seen in 2009 are not likely to be sustained in the coming years.

Not-for-profit hospitals improved financially in 2009, but the industry must make expense management a continuing key focus in looking ahead, said Moody's senior credit officer, Kay Sifferman, in a report. She cited Medicare and Medicaid reimbursement levels as key factors.

Also, she said, liquidity levels still remain below peak levels in 2005.

Sifferman's negative outlook predicts weaker financial performance ahead due to a sluggish economic recovery, growing levels of uncompensated care, and flat volume trends.

"Liquidity will likely hover at these lower levels as most hospitals will not be able to sustain their two-year capital diet and remain competitive," she said. "Those hospitals that can execute deeper levels of expense management through fundamental changes in their operations will be positioned better to navigate the next couple of years."


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