| Business

Larger text Larger text Smaller text Smaller text | Order Photo Reprints

Small, nonprofit hospitals struggle

On the Grid

From the shale fields to the cooling towers, Trib Total Media covers the energy industry in Western Pennsylvania and beyond. For the latest news and views on gas, coal, electricity and more, check out On the Grid today.

Friday, April 26, 2013, 12:01 a.m.

The nonprofit hospital industry is facing a number of financial challenges, including falling patient volume and lower payments from the government and health insurers.

But small independent hospitals in particular are at greater risk of financial hardship than their larger counterparts because they lack the resources to deal with economic pressures, according to a report from credit rating agency Moody's.

Five of the six credit-rating downgrades of nonprofit hospitals by Moody's in the first quarter were for smaller hospitals, including Ohio Valley General Hospital in McKees Rocks.

“Almost all rating downgrades were small-sized providers, continuing a trend we have seen for several years,” said Lisa Goldstein, a Moody's analyst. “Small hospitals are unable to absorb the reimbursement pressures facing the industry.”

While the six downgrades in the first quarter was an improvement from the 11 downgrades in the same quarter last year, Moody's analysts were nonetheless troubled by what they're seeing with small hospitals.

“The smaller health-care providers are burdened with several disadvantages, including limited leverage during negotiations with commercial payers and vendors, lack of economies of scale, and over-reliance on a few key physicians,” the Moody's report states. “Looking ahead, Moody's expects more downgrades than upgrades in the second quarter, given that there are already three hospitals currently under review for downgrade.”

Ohio Valley General, a 138-bed nonprofit hospital, was downgraded by Moody's in March to Ba3, from Ba2, citing continued and worsening losses from its operations, a near tripling of unfunded pension liability and its large Medicare population, for which funding is at risk of being cut by the federal government.

Ohio Valley General CEO David Scott, in a written statement, said: “While we face many of the same financial uncertainties that other independent community hospitals are experiencing, we are continuing to improve our operating performance and I believe we are in a good position to respond to the challenges.”

Moody's also has a negative outlook on the hospital, which “reflects the risks of continued volume and market share declines, and operating losses that are likely to continue in fiscal year 2013,” the agency said.

The hospital has $25.7 million of outstanding bonds issued by Allegheny County. Its unfunded pension liability jumped to $17.6 million in 2012, up from $6.5 million in 2011. It has 500 employees.

On the positive side, Moody's noted, Ohio Valley General had 275 days of cash on hand as of Dec. 31, giving it a “good cushion” of cash to debt.

Hospitals large and small across Western Pennsylvania have been dealing with the economic pressures highlighted by Moody's.

UPMC, the largest hospital network in the region, said income from operations dropped to $12.5 million in its most recent quarter, down from $64.7 million the year before, on higher expenses and lower net patient revenue, which was affected by lower reimbursements from insurance companies and Medicare and Medicaid.

Meanwhile, many of the region's community hospitals outside Pittsburgh are worried that a plan by health insurer Highmark Inc. to convert itself into a hospital system will worsen an already tenuous financial situation.

Highmark has said that it will work to strengthen community hospitals once a deal to buy nearly bankrupt West Penn Allegheny Health System is approved by state regulators.

But consultant reports released this month showed that the plan will divert patient volume from at least seven smaller hospitals around Pittsburgh to boost West Penn Allegheny.

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

Add Alex Nixon to your Google+ circles.

Subscribe today! Click here for our subscription offers.




Show commenting policy

Most-Read Business Headlines

  1. Pennsylvania shale gas producers received hundreds of environmental citations in 4 years, PennEnvironment says
  2. SEC alleges BNY Mellon bribed foreign investors by handing internships to their relatives
  3. Obamacare enrollment up in Pennsylvania
  4. U.S. Steel warns it may lay off almost 2,000 workers in Alabama, Texas
  5. MSA Safety products in demand to protect workers in dangerous jobs
  6. U.S. Steel has 1st profitable year since 2008
  7. Emergency room visits decline as navigators steer patients to proper medical care
  8. U.S. company outlooks worry investors, sending stocks lower
  9. India nuke deals still thorny for U.S. despite ‘breakthrough’
  10. Energy companies vie for experienced workers with skills in high demand
  11. Yahoo to spin off Alibaba shares