Moody's: Nonprofit Healthcare Debt Sees Record Downgrade

John Commins, February 13, 2013

Moody's Investors Service's dollar value downgrade of not-for-profit healthcare debt increased by 213% in 2012—the largest one-year drop by the rating agency since it began tracking the sector in 1995.

In total, a record $20 billion in not-for-profit debt was downgraded in 2012 by Moody's compared with a $6.4 billion downgrade in 2011. The downgrades were driven largely by falling patient volumes and weak revenue growth. Other factors included declines in liquidity, more competition, increased debt load, pension fund pressures, and management and governance problems.

The $20 billion downgrade was more than double the $9.7 billion in upgraded debt for the not-for-profit healthcare sector for 2012. Nonetheless, Beth Wexler, Moody's vice president and senior credit officer, downplayed suggestions that the not-for-profit healthcare sector was teetering.

"There is a lot of headwind but this isn't a signal on our part that the whole industry is going to collapse onto itself," Wexler told HealthLeaders Media.

"In spite of the fact that the dollar amount seems large, the number of debt downgrades and upgrades, the increase wasn't precipitous the way the dollar amount was. It's in a sense the way the data got cut this way and who the downgrades impacted as opposed to this being the beginning of Armageddon, which is not the case at all."

John Commins

John Commins is a senior editor at HealthLeaders Media.


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