Moody's: Rhode Island Bill on Hospital Acquisitions Could Help Community Hospitals

Earlier this month, the Rhode Island Senate unanimously approved legislation that would eliminate current restrictions on for-profit hospital companies' abilities to buy other hospitals, and the news could be a credit positive for Rhode Island's small community hospitals that are struggling, according a weekly credit report from Moody's Investors Service.

It is expected the bill will be signed into law, thus erasing a three-year waiting period between acquisitions of non-profits hospitals by for-profit hospital operators. Moody's analysts said the law would help the state's hospitals from going under. "Acquisition by for-profit companies provides weak, low-rated, [non-profit] hospitals opportunities to lower costs, gain efficiencies, fund immediate capital needs and address growing pension liabilities," according to the report.


Steward Health Care, the Boston-based for-profit hospital group that is a portfolio company of private equity firm Cerberus Capital Management, initiated the legislation. Steward owns 10 hospitals in Massachusetts and has an agreement to acquire Landmark Medical Center in Woonsocket, R.I.

Several Rhode Island hospitals are in financial distress — Westerly (R.I.) Hospital and LMC are in receivership, and other independent hospitals have poor credit ratings, such as St. Joseph Health Services of Rhode Island in North Providence (Caa2). Moody's analysts also noted the larger hospitals in the state, such as Lifespan in Providence, may see fewer referrals for tertiary services if the small community hospitals are scooped up by for-profits like Steward.

More Articles on Moody's Credit Reports:

Moody's: New Boston-Area Contracts Credit Negative, Oklahoma Provider Fees Positive

Moody's: 1Q of 2012 Shows Even Mix of Hospital Upgrades, Downgrades

Moody's: Non-Profit Hospitals Need Individual Mandate

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