Sector Snap: Hospital companies seen merging

NEW YORK (AP) ? Moody's Investors Service said Thursday that the shaky economy is a key force in the consolidation of not-for-profit hospitals.

Analyst Lisa Goldstein said not-for-profit hospitals are seeking partners because they are under pressure from the weak economy ? which has led to an unusual decline in patient admissions ? along with tighter Medicare reimbursements, ever-growing health care costs, and steep pension liabilities for hospitals that have defined benefit plans.

Many of those elements have been factors in previous waves of hospital consolidations, Goldstein said. But she said median hospital admissions actually fell in fiscal 2010, which is unusual and didn't happen in the late 1990s or mid 2000s, when large numbers of hospitals also merged. The most recent economic downturn has also been deeper and lasted longer.

When hospitals consolidate their operations, efficiency improves and risk is spread out, Goldstein wrote. That's good for their credit. However hospitals that get left out in consolidation talks, especially smaller stand-alone facilities, will experience greater pressure on their credit.

Source: http://news.yahoo.com/sector-snap-hospital-companies-seen-merging-221710754.html

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