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Pa. leads in credit downgrades of hospitals

| Wednesday, Feb. 13, 2013, 12:01 a.m.

Pennsylvania's nonprofit hospitals received more than their fair share of credit-rating downgrades last year, according to a report from Moody's Investors Services.

Nearly one in four hospital downgrades by the credit-rating agency in 2012 cited institutions in the state, including Pittsburgh's second-largest hospital system, West Penn Allegheny Health System.

A flat or declining population, along with large elderly populations, puts pressure on the hospitals, Moody's analyst Lisa Goldstein said.

Most of the downgraded hospitals are small- to medium-sized, serve limited markets, or are not the first choice in a market, she said. Many chose to stay independent rather than align with a larger system.

“The prevailing theme in Pennsylvania is a weak demographic profile across the state,” Goldstein said.

Of the 40 nonprofit hospitals or health systems Moody's downgraded last year, nine were in Pennsylvania, more than any other state. California, Illinois, Michigan, Ohio and Rhode Island each had three.

In addition to West Penn Allegheny, Moody's downgraded Albert Einstein Healthcare Network in Philadelphia; Good Samaritan Hospital in Lebanon County; KidsPeace Inc., a Lehigh County operator of a psychiatric hospital; Lewistown Hospital in Mifflin County; Lower Bucks Hospital in Bristol, Bucks County; Pinnacle Health System in Harrisburg; St. Vincent Hospital in Erie; and Temple University Hospital in Philadelphia.

“I hate to admit this, but hospitals generally are not that well-run,” said Jan Jennings, CEO of American Healthcare Solutions, a Downtown consulting company. “Things on the health care scene are very ugly.”

With little population growth, hospitals have trouble increasing patient volumes, and elderly residents squeeze hospital finances because they usually are covered by the government's Medicare program, which is cutting payments to hospitals.

West Penn Allegheny and St. Vincent Health System in Erie could become exceptions to the trend of struggling independents if Highmark Inc., the state's largest health insurance company, acquires them as planned.

Yet both face stiff competition from UPMC, the dominant hospital system in Western Pennsylvania.

Goldstein said there were no credit-rating upgrades of Pennsylvania hospitals last year, but many were affirmations of “A”-rated health systems. Some health systems are adapting to economic and demographic trends and performing well, while others are being left behind.

Though Florida, which has a large elderly population, might be thought of as a good comparison to Pennsylvania, Moody's upgraded three hospitals there last year and downgraded one.

“Florida's population is growing, and some of the pockets of older populations there tend to be wealthier than the national average,” Moody's analyst Beth Wexler said.

A better comparison is neighboring “rust belt” state Ohio, which ranked No. 2 behind Pennsylvania in 2011, Wexler said.

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.

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