Moody's: Credit impact of Harvey on affected Texas nonprofit hospitals will take 'multiple years' to develop

In the wake of Hurricane Harvey, which wreaked havoc on the Texas coast, the credit impact for affected nonprofit hospitals is uncertain, according to Moody's Investors Service.

"The severity will depend on the magnitude of property loss, the amount and timing of insurance recovery, and the availability of Federal Emergency Management Agency funds," analysts said in the report, noting patient volumes will also play a significant role.

Moody's expects additional Harvey recovery costs to be a negative force on hospitals' fiscal year 2018 operating performance. However, analysts added generally good liquidity will provide stabilization.

"For healthcare systems affected by Harvey, patient volume losses may be significant, especially for outpatient and elective services with outpatient facilities more prone to flooding and elective procedures often deferred," analysts said. "The financial impact of lost patient volume could linger for many months or even years, depending on the extent of damage and the possibility that people temporarily or permanently relocate from affected areas."

Moody's said many facilities in the Houston-based Texas Medical Center "are relatively well prepared to weather the impact of the hurricane," as TMC hospitals activated "submarine" doors meant to protect tunnels from floodwaters.

Analysts said Harris County Hospital District, Memorial Hermann Health System and Texas Children's Hospital, all part of TMC, are most likely to experience a negative credit impact. Moody's also mentioned financially struggling Englewood, Colo.-based Catholic Health Initiatives, which also operates within TMC.

"While CHI is experiencing financial difficulties, its multistate geographic diversification should allow the system to absorb most of the potential damage," analysts said. "Harris County Hospital District faces several long-term challenges from the storm. First, the system derives a significant share of its revenue from property taxes and property values could be seriously impacted by the storm. Additionally, the district serves a largely indigent population that will be materially impacted by the storm, potentially causing serious disruptions to future patient volumes. It is likely that hospitals in Dallas, San Antonio and other regional centers will see an uptick in volume from population dislocations."

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