Massachusetts.

Moody's Investors Service last week downgraded Boston's Brigham & Women's Hospital to A-1 from double-A.

The downgrade was due, in part, to increased financial pressures placed on the hospital by heightened competition among hospitals in the Boston region and lower available cash flow for debt service coverage.

The downgrade affects the hospital's $221 million of outstanding debt.

The report said that although the hospital remains one of the premier teaching hospitals in the nation, any future improvement in credit quality is not expected until fiscal 1996.

Over the past three years, Brigham & Women's has seen a declining financial performance despite cutbacks of about $450 million and attempts to stabilize use of its facilities.

The hospital is expected only to break even or show a slight deficit through fiscal 1996.

Any improvement in credit quality, Moody's said, would be dependent on ongoing plans for a successful integration with Massachusetts General Hospital.

Although the hospital's reliance on business generated by the Harvard Community Health Plan has helped spur growth, the rating agency said the hospital would have to work to become less dependent on the plan's patients.

Moody's said the health plan contract represents 24% of the hospital's total business, and warned that Brigham & Women's needs to diversify its business.

Standard & Poor's Corp. rates the hospital's long-term debt at A-plus. Fitch Investors Service does not rate the credit.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER