Moody’s Report: New Mass Price Capping Law “Credit Negative” for Hospitals

In the soon to be long list of unintended consequences as a result of the brand new price capping law signed yesterday by Governor Patrick, Moody’s released a report warning of the future impact of the law on hospitals in the Commonwealth.

While not a formal downgrade, it could raise the cost of capital borrowing for these hospitals and increase the cost of providing health care going forward. These extra costs will be passed onto consumers in the form of higher care costs and insurance premiums.

More from SHNS($):

The health care cost control law signed by Gov. Deval Patrick Monday will hurt the bottom lines of Massachusetts hospitals and limit their flexibility to grow, a major credit rating agency warned Monday.

“The Legislation is credit negative for Massachusetts hospitals because it will limit their revenue growth and reduce their operating flexibility,” Moody’s Investment Services wrote in a credit analysis of the new law.

The report also suggested the money derived from a $225 million one-time assessment on health plans and major health care providers to help support community hospitals would artificially work to keep smaller hospitals in business, while limiting the expansion opportunities for larger hospital groups and hurting their credit standings.

The assessment on insurers mentioned above will go to keeping these community hospitals open, but for how long?

By default, the analysis acknowledges that the current infrastructure is unsustainable and when the funding dries up, hospitals will close. As a result, some patients will travel to receive their care in Boston.

What do you think? Will this increase or decrease the cost of care?

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