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Moody's, S&P: For-Profit Hospitals' Outlook Stable

John Commins, for HealthLeaders Media, March 7, 2013

Despite looming 2% Medicare reimbursement cuts and other threats to the bottom line, two bond rating agencies this week issued a stable outlook for the nation's for-profit hospital sector in 2013.

Moody's Investors Service said its stable outlook reflects expectations for modest earnings growth over the next 12-18 months given the headwinds facing the sector.

"We expect same facility aggregate (Earnings Before Interest, Taxes, Depreciation and Amortization) to rise by around 0% to .5% in the next year or so," Dean Diaz, Moody's vice president and senior credit officer, said in a media release.

"EBITDA growth in 2013 will be difficult, but resume in 2014 as coverage expands. Weak admissions, a decline in the number of patients with high-paying commercial insurance and increasing bad debt expense are all currently constraining earnings."

Meanwhile, Standard & Poor's Rating Service said this week it plans to take no immediate ratings actions on the 2% Medicare cuts mandated by sequestration that took effect on March 1.

"Reimbursement risk is one of the most important credit factors in our analysis of healthcare companies that rely on third-party sources of revenue," S&P analyst David Peknay said in prepared remarks.

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