New report looks at hospitals with bad credit

Dec 30, 2013 | Healthcare Accounts Receivable

Hospitals, just like any other organization, must maintain a positive credit rating. This can only happen if they pay their bills on time. However, a number or medical organizations are struggling to do so, which had led to a credit rating problem at several major institutions. 

According to a year-end report from Moody's Investor Services, the most notable hospital is West Penn Allegheny Health System. The annual Municipal Speculative Grade and Distressed Issuers report states that the Pittsburgh, Pennsylvania-based hospital defaulted on bond payments, among many other issues. While an article in the online publication Trib Live suggests the organization is slowly recovering financially since its near bankruptcy this past April, it still has work to do.

"As they ramped up debt and they acquired properties, it became a much more pressured, competitive environment for them, and their business model really suffered," Anne Van Praagh, Moody's chief credit officer for public finance, said in the report.

To ensure debts are paid on time, hospitals must maintain cash flow. They cannot suffer any setbacks that could hinder their revenue growth. If, for example, an organization endures high turnover or any other issues that disrupt operations, they run the risk of losing revenue. By working with a third-party provider of financial operations, they can prevent this issue. They can take control of lingering low-balance accounts that run the risk of cumulating. This helps medical organizations maintain steady cash flow and alleviate the risk of falling behind on payments, thus preventing them from having bad credit.