Moody's Warns Healthcare Reform Could Harm Hospital Credit Ratings

John Commins, for HealthLeaders Media , November 24, 2009

Moody's wrote hospitals that are best positioned to withstand large Medicare cuts in high-cost regions will be part of multi-state systems that can rely on broader economies of scale and import cost-efficiencies from beyond their region, and those hospital systems that can gain the most new paying patients that are newly covered by health insurance.

Conversely, the most vulnerable hospitals will be those stand-alone hospitals that are dependent upon high-cost referral practices and that don't gain many new paying patients.

"The sharp regional cost differences across the U.S. highlight the local nature of healthcare markets. Unlike many industries, including higher education, which have a national customer base, hospitals typically draw more than 90% of their patients from within 50 miles of the hospital. When referrals, practices, and/or reimbursement patterns emerge within a community, they tend to stay entrenched locally because little competition exists from providers outside the region," the report noted.

John Commins is a senior editor with HealthLeaders Media.

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