CHICAGO Reversing a trend of the past year, Mo0dy's Investors Service assigned more health care bond rating downgrades in the second quarter than upgradess.
The 12 health car bond rating downgrades affected $70g million of health care revenue bonds, while the five upgrade covered $479 million of debt.
Before the second quarter, health care bond upgrades-had surpassed downgrades in three out of four quarters, according to Moody's.
Diana Lee, a vice president in the health care ratings group at Moody's, said the number of second-quarter downgrades confirms the rating agency's long-term negative outlook for health care bond ratings. Moody's expects reimbursement and "competitive pressures on health care institutions to heighten in the future, she said.
Moody's downgraded the ratings for:
* Alta Bates Medical Center in Berkeley, Calif., to Baa from Baa1.
* Crozer-Chester Medical Center in Upland, Pa, to Baal from A.
* Columbus-Cuneo-Cabrini Medical Center, now known as ColumbusCabrini Medical Center, in Chicago, to Baa from Baa1.
* Health Dimensions, now known as Good Samaritan Health System, in San Jose, to Baag from A.
* Hurley Medical Center in Flint Mich., to Baa from Baa1.
* Mercy Hospital and Medical Center in Chicago, to Baal from A.
* Methodist Health Services in Peoria, Ill., to Baa1 from A.
* Proctor Community Hospital in Peoria, Ill., to Baa from A.
* Riverside Health System and Riverside Senior Living- Center in Kankakee, Ill., to Ba1 from A.
* Saints Memorial Medical Center in Lowell, Mass., to Ba from Baa in April and to B from Ba in June.
* St. Elizabeth Medical Center in Granite City, Ill., to Ba from Baa1.
In a press release, Moody's said the downgrades' reflect financial problems appearing in several markets, including California, Illinois, and Massachusetts.
In its May review of Illinois health care institutions, Moody's issued six downgrades. The-rating agency said the six institutions experienced a deterioration of financial performance due to industrywide trends, including highly competitive market conditions and increasing pricing pressures from managed care contracts.
Two of the downgrades in other states were related to delays in streamlining operations of recently merged institutions.
Ditmar Kopf, an assistant vice president at Moody's, said that both Crozer-Chester Medical Center and Saints Memorial Medical Center experienced losses in, the were of mergers that resulted in the creation of the systems.
Both institutions had financial problems partly because the anticipated consolidation of services after the mergers did not take place as quickly as planned, Kopf said.
In the second quarter, Moody's upgraded rating for:
* AV Med/SantaFe Healthcare in Gainesville, Ha., to Baa1 from Baa.
* Eisenhower Medical Center in Rancho Mirage, Calif., to A from Baa1.
* Hermann Hospital in Houston, to A from Baa1.
* Huntington Hospital in Huntington, N.Y., to Baa from Ba1.
* Pitt County Memorial Hospital in Greenville, N.C., to Aa from A1. Moody's officials said the five upgraded institutions saw improvements in financial performance because of a variety of factors, including strengthened cash positions, strong local market share, and manageable debt levels.
Pamela Federbusch, an assistant vice president at Moody's, said that AV Med/SantaFe Healthcare is an example of an institution that has benefited from a shift in its health care delivery focus away from traditional hospital services.
"It was really a different organization two years ago," she said. In the past few years, Federbusch said, AV Med/SantaFe has drawn a greater percentage of its profits from its health maintenance organization. The health maintenance organization has been instrumental in decreasing the system's costs and beefing up profit margins, she said.
During the second quarter, Moody's confirmed or assigned first-time unenhanced
ratings to 44 other health care bond issues representing $3.35 billion of debt. Moody's also assigned Aaa-insured ratings to 30 health care bond issues, representing $842 million of debt.
