Some hospitals’ margins improved in the first quarter of 2009 according to data from Thomson Reuters. However, Fitch and Moody’s, the credit ratings agencies, expect continued declines through 2009.

Thomson Reuters does report that while total margin improved for all types of hospitals, there was a wide variation in Q1 of 2009. Compare the top quartile, bringing at least 7% margins, versus the bottom quartile, reporting total margins of -1% or less. Smaller and larger community hospitals had the largest margins, and major teaching hospitals among the lowest margins.

In August 2009, Moody’s finds that most U.S. hospitals are still experiencing declines in volumes of patient demand. Moody’s opines that the decline in demand is recession-induced as patients have lost insurance coverage. They predict a sluggish recovery.

Fitch writes that after 5 years of consistent improvement in hospital finances, 2009 medians for acute care hospital margins are declining.

Under these conditions, cash reserves continue to be stressed, Thomson Reuters says, with median days cash on hand down to 90 days in Q1 of 2009. Fitch says that hospital liquidity has suffered, also, due to investment portfolios falling as much as 30% to 40%.

Both Fitch and Moody’s have negative outlooks for hospitals. Fitch expects as much as 24 months where downgrades will exceed upgrades in their credit assessments.

Health Populi’s Hot Points: Another negative financial report appeared in the second week of August 2009, this one concerning Blue Cross and Blue Shield financial results for 2008. The unrealized loss of $3.1 billion was reported for 2008, compared to gains of $285.5 million in 2007 and $1.9 billion in 2006.

A.M. Best, a third credit rating agency peer of Fitch and Moody’s, wrote that 2008 was “challenging” for Blues companies overall, in aggregate showing a net income decline of 40.9% in 2008. This reflects drops in both investment income and underwriting expenses, which fell 5.5% in 2008.

On the upside, underwriting losses fell as a percentage less than in 2006 and 2007 when such declines were 24.6% and 8.5%, respectively.

The recession continues to take its toll on both providers and health plans, as the macroeconomy strips employers of profits and employees of rich health insurance benefits they once enjoyed.

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