Rise in Hospital Consolidations 'Favorable,' Says Moody's

"In the short term, a merger or acquisition strategy may fund a weak, low-rated, not-for-profit hospital's immediate capital needs and address growing pension liabilities. Consolidations can also help bondholders increase the value of their holdings if it results in higher credit quality when the debt is assumed by a stronger system, or even get 100% immediate recovery in a distressed situation if debt is paid off at the merger."

The transition to for-profit status, however, will bring a loss of transparency.

"As for-profits make inroads into not-for-profit strongholds like Boston and Youngstown, the remaining not-for-profit hospitals will have a tougher time peering inside the walls of their former brethren as the new for-profit owners build a disclosure fortress around their latest acquisitions, upping the competitive climate," Moody's said.

See Also:
Hospital Survival May Depend on Mergers