Health Care Assessment

New Jersey’s not-for-profit hospitals avoided cuts in state aid for the current fiscal year, but that could change for the fiscal 2012 state operating budget, according to Moody’s Investors Service.

Moody’s assigns a negative outlook to the health care providers, similar to its national outlook for such entities.

Overall, hospitals in the state face challenges such as weaker financial performance compared to other facilities across the country, below-average liquidity levels, competitive markets, and high levels of charity care.

In addition, Gov. Chris Christie may need to reduce state aid to not-for-profit hospitals in the fiscal 2012 budget to help the state balance its operations. Fiscal 2012 begins July 1.

In the fiscal 2011 budget, Christie cut state aid to schools, municipalities, and higher education to help fill an $11 billion deficit.

“The ability to dodge future budget cuts remains uncertain, however, given the state’s financial position,” a Moody’s report said. “And we expect more hospital downgrades than upgrades, given the pressures and challenges facing the health care industry.”

Over the past year, Moody’s has downgraded two New Jersey hospitals, upgraded one, and affirmed 15 ratings. New Jersey’s median hospital rating is Baa2, two notches below the U.S. median hospital rating of A3.

The New Jersey facilities that Moody’s rates tend to be older than other hospitals in the U.S.. The state’s average plant age is 11 and a half years, compared to the national median of 10 years. Some New Jersey facilities are nearly 20 years old.

“We anticipate more hospital closures, payment defaults, or bankruptcy filings over the next several years for those hospitals that cannot respond effectively and swiftly to these challenges and invest in long-term strategies,” a Moody’s report said.

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