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.
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“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.
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