Nov. 1—An increasing use of observation status drove not-for-profit hospital debt rating downgrades in the latest creditworthiness report from Moody's Investors Service.

The credit rating agency downgraded credit ratings for 10 not-for-profit hospitals and upgraded the ratings of eight in the third quarter of 2013. That was a change from the six hospitals downgraded and the three upgraded in the previous quarter.

The latest debt report increased the total downgraded hospitals this year by the agency to 30, while only 18 were upgraded.

The ratings changes were generally driven by fluctuations in admissions. Specifically, status changes for six of the 10 downgraded hospitals were "primarily"driven by declines in admissions, while six of the eight upgraded hospitals had "positive volume trends."

Admission drops were primarily blamed on an increasing use of observation status instead of inpatient status.

The bad news for hospitals is likely to continue, according to the report’s authors.

"We expect downgrades to continue to outpace upgrades in the fourth quarter with six of seven ratings that are under review for downgrades as of September 30, 2013," the report stated.

Additionally, Moody's left 72 ratings unchanged, although seven negative outlooks and four had positive outlooks.

Publication Date: Friday, November 01, 2013