The Massachusetts Model: What to Expect
"Cuts in aid drag down hospital’s debt rating; Boston Medical Center posts first loss in 5 years" by Robert Weisman, Globe Staff | January 27, 2010
A leading credit rating agency yesterday lowered the debt rating on Boston Medical Center as the financially troubled hospital posted an operating loss of $24.5 million for the 12 months ending Sept. 30, its first in five years.
Rating agency Standard & Poor’s cited the Massachusetts state government’s reduced support for Boston Medical Center in a statement accompanying the downgrade, and warned that a further cut in the debt rating was a possibility....
The drop from a A- to a BBB+ rating will have no immediate effect on Boston Medical Center’s bonds, issued in 2008 and 1998, but could make it tougher for the safety net hospital to issue debt in the future. It also could prompt bondholders to get more deeply involved in the operations of the hospital....
Yup, EVERYTHING is DEBT-BASED in AmeriKa -- and we all know who that benefits.
Boston Medical Center’s operating loss was narrower than the $38 million deficit it earlier projected, largely because of millions of dollars in cost-cutting, said Ronald E. Bartlett, its chief financial officer. Those cuts included wage freezes for nonunion employees, savings in purchasing and other areas, and the elimination of 120 jobs, mostly by not filling vacant positions, Bartlett said.
But bankers got billions for bonuses.
The hospital reported a net loss of just $10.3 million because its operating loss was partly offset by gains in investment income as the stock market bounced back.
Then how come the pension is bumping along the bottom, huh?
As expected, the largest factor in the down year was a $102 million cut in supplemental payments from the federal and state governments.
Really, WHERE is all that TAX LOOT GOING?!
The payments are made in recognition that, as a hospital that serves a mostly low-income population on Medicare and Medicaid, it can’t earn enough from private insurers to be profitable without the added money. They help to cover hospital services such as shuttle buses and translators.
With governments squeezed by the economic downturn, the supplemental payments have declined....
We know where the loot went.
The hospital’s financial report did contain some encouraging news: Revenue from patient services increased by $43 million on the strength of higher inpatient and outpatient volume, while academic and research revenue increased $5.1 million.
But Standard & Poor’s assigned a “negative outlook’’ with its downgrade of debt ratings, citing the hospital’s reduced government support and mounting financial losses. Despite that, the agency noted that Boston Medical Center retains a strong business position and provides essential services to the communities it serves.
“We’re watching the level of payment support from the state, and the financials are not there now,’’ said Cynthia Keller Macdonald, a secondary credit analyst for Standard & Poor’s in New York.
In the ratings agency’s statement yesterday, it warned that Boston Medical Center will need to reach a funding agreement with the state soon.
“If BMC does not receive additional revenue support from the Commonwealth, either through supplemental funds or through improved reimbursement rates,’’ it said, “new management at BMC will be severely challenged to maintain its historically sound financial performance and as a result the rating could be lowered again in the near term.’’
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