6.29.10 | Thomas Lee

Moody’s warns nurses strike could hurt hospitals credit rating

As nurses and Twin Cities hospitals resume contract negotiations today, Moody’s Investor Service lobbed in one more thing for both sides to think about.

The company warned Monday that an open-ended strike by 12,000 nurses belonging to the Minnesota Nurses Association (MNA) could damage the hospitals credit rating, making it harder and more expensive for hospitals to borrow money.

Given the tight credit market, a ratings cut could be potentially devastating to the cash-strapped hospitals who rely on lenders to finance everything from building new facilities to paying everyday bills.

“A long strike could have negative rating pressure on the hospitals who have striking nurses,” Moody’s analyst Sarah Vennekotter wrote in a report. “The cost of transporting, housing and training all those temporary nurses to replace the striking nurses could have a significant effect on their operating margin.”

“In addition, over the longer term, the provisions that the nurses union is asking for could also negatively affect the credit ratings with the salary increases they are proposing, involving changes to their benefit plan and the other provisions they are seeking,” she said.

With such thin margins, hospitals have little room for error. If expenses rose just 1 percent while revenue remained the same, the hospitals’ operating income could fall 24 percent, Vennekotter estimated.

Experts say a strike could force hospitals to consolidate. At the very least, non-union competitors like Hennepin County Medical Center or even the Mayo Clinic will pick up business as patients seek care elsewhere, said local healthcare analyst Allan Baumgarten.

Thomas Lee

Thomas Lee was the Minnesota Bureau Chief for MedCityNews.

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Tags: Hennepin County Medical Center, hospitals, Mayo Clinic, Minnesota, Nursing

Comments Post a comment

Cash strapped hospitals? Hospitals in the metro pulled in over 750 million last year. The CEO of ALLINA, alone, received a 3 million dollar bonus last year. Also, nurses are not striking on benefits or wage increases, though the hospitals gave them a contract that drastically decreased both for the next 3 years. Nurses are striking over the ridiculous scheduling and staffing outlined by the contracts that the hospitals gave them. Perhaps, as a journalist, you should look over the contract and include it in your analysis. Just awful reporting, all in all.

Comment by ren1980 — June 29, 2010 @ 2:49 pm

I’m sorry you feel my reporting is awful. I do try my best. Perhaps you should look at the hospital financials. I did…

http://www.medcitynews.com/2010/06/high-on-ambition-low-on-cash-twin-cities-hospitals-face-choices/

Comment by Thomas Lee — June 29, 2010 @ 3:06 pm

There margin’s might be slim, but the management should think less about making the hospital more like a hospitality hotel and more on patient care.

Comment by Chris — June 30, 2010 @ 3:40 pm

Moody seems to lack a lot of info but if this one is accurate, BOO HOO!!

Comment by Bonnie Martin — June 30, 2010 @ 8:14 pm

Thanks for your balanced reportage. I’m an MNA RN who is thrilled to be able to stay with her patients this Tuesday and beyond. I think the potential drop in the hospitals’ Moody’s rating did play a part in reaching a settlement that both sides can live with. I hope the issue of staffing is seriously addressed before the next round of negotiations, with less posturing and more collaboration from both sides. The Twin Cities MNA contract is responsible for much of the stability and high quality of the hospitals’ nursing workforce–this story deserves recognition too.

Comment by Michelle Orcutt — July 1, 2010 @ 11:18 pm