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Small hospitals become more economically viable

NEWS IN BRIEF — Posted Oct. 18, 2010

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Hospitals with annual net patient revenues of less than $100 million took a financial hit in 2008 when the recession was reaching its peak, but balance sheets began to improve in 2009, according to a report issued Oct. 4 by Standard & Poor's.

The report, "U.S. Not-For-Profit Small Hospitals Move Toward Stability," tallied data on 71 of these types of institutions in 2009 and 83 in 2008.

Most are in rural areas, and the number in this annual analysis decreased because some hospitals became too large to be included.

The operating margins for institutions with an S&P credit rating of BBB- increased from 0.6% in 2008 to 1.1% in 2009. Those with a rating of BBB grew their operating margins from 1.6% to 3.3%, and those rated BBB+ improved this number from 0.3% to 3.2%. Only the operating margins of those rated A to A- worsened, from 2.5% in 2008 to 2.1% in 2009.

AAA is the highest rating under the Standard & Poor's system. Any hospital rated in the range of AAA, AA, A, or BBB would be considered financially secure, though its susceptibility to the larger economy would be considered greater as its rating goes down. BB, B or CCC ratings mean those hospitals would be considered "vulnerable."

Analysts believe that operating margins improved overall because, although patient volumes at small hospitals declined in 2008 and 2009, most of these types of health care facilities cut expenses and improved physician recruitment and retention.

Note: This item originally appeared at http://www.ama-assn.org/amednews/2010/10/18/bibf1018.htm.

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