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Moody's Reports Nurse Strike Will Have Credit Negative Effect

Rebecca Hendren, for HealthLeaders Media, June 29, 2010

The temperature is rising in the dispute between the Minnesota Nurses Union and Twin Cities Hospitals. The union said it will begin an open-ended strike on July 6 if a deal is not reached with six local hospital systems.

The 12,000-member union is threatening what would be the largest nursing strike in the nation's history. Doing so will have a "significant credit negative" effect for the organizations, warned independent credit rating company Moody's Investor Service in a report this week.

Moody's says a one-day work stoppage on June 10 brought associated costs with transporting, housing, and training the more than 2,800 temporary nurses who filled in for the strikers. Postponing non-emergency procedures increased the lost revenues.

"A long strike could have negative rating pressure on the hospitals who have striking nurses," says Moody's analyst Sarah Vennekotter. "The cost of transporting, housing, and training all those temporary nurses to replace the striking nurses could have a significant effect on their operating margin. In addition, over the longer term, the provisions that the nurses union is asking for could also negatively affect the credit ratings with the salary increases they are proposing, involving changes to their benefit plan and the other provisions they are seeking."

Vennekotter warns that a lengthy strike's costs will put huge rating pressure on the health systems. In addition, decreased patient volume will combine with the rising utility and supply costs to reduce operating margin. Moody's says four of the affected hospital systems generated $7.2 billion in revenue and $284 million in operating income in 2009. If expenses were to rise by just 1% while revenues remained unchanged, Moody's predicts operating income will fall 24%.

Meanwhile, the Minneapolis Star Tribune reports division among Twin Cities nurses over whether the strike is appropriate.

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