Moody's Investors Service has cut the rating outlook to stable from positive for Steward Health Care System, indicating the Boston-based system faces heavy challenges to its operating model.
As of Dec. 31, 2013, the for-profit Steward operated 10 acute-care hospitals and one long-term care hospital, posting $2.1 billion in total revenue for the year. However, the system continues to struggle with profitability, as most of its acute-care hospitals are community-based and must compete with the multitude of teaching hospitals in the Boston metro area.
In the second quarter of fiscal year 2013 alone, nine of the 10 Steward acute-care hospitals recorded red ink. Quincy (Mass.) Medical Center lost $5.6 million in that period.
Moody's analysts said "a challenging operating environment and limited free cash flow will likely prolong a meaningful improvement in credit metrics" for Steward. In addition, the health systems will likely have to "undergo significant restructuring efforts in order to improve margins and contend with weak volume trends in a very competitive market."
This past November, Steward CEO Ralph de la Torre, MD, said layoffs may be necessary in healthcare to deal with today's budget pressures, although
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