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Hospitals to feel effect on credit, operating performance from Harvey, Moody's says

Lost patient volume, deferred elective procedures and the relocation of residents are all contributing factors.

Susan Morse, Senior Editor

Recovery costs from Harvey will negatively impact operating performance for the Houston area's not-for-profit hospitals in 2018, according to Moody's Investor Service.

Patient volume losses may be significant, especially for outpatient and elective services due to elective procedures being deferred, Moody's said Thursday. Outpatient facilities are also more prone to flooding.

[Also: McKesson Corporation, Vizient donations to Hurricane Harvey relief total well over $1 million]

The most likely not-for-profit healthcare providers to be negatively impacted are Harris County Hospital District, Memorial Hermann Health System and Texas Children's Hospital, all part of Texas Medical Center.

Harris County Hospital District faces several long-term challenges. The system derives a significant share of its revenue from property taxes. Property values could be seriously impacted by the storm. Additionally, the district serves a largely indigent population that will be affected by the storm, potentially causing serious disruptions to future patient volumes.

[Also: CMS arranges dialysis services for renal patients displaced by Harvey, waives various requirements to bridge care gaps]

The financial impact of lost patient volume on all hospitals in the region could linger for many months or even years, depending on the extent of damage and the possibility that people temporarily or permanently relocate from affected areas, Moody's said.

Hurricane Harvey, now downgraded to tropical depression, caused the flooding of large portions of Houston and eastern Texas.

[Also: MD Anderson cancels appointments; Memorial Hermann Sugar Land closes amid epic Harvey flooding]

Moody's, which looked at not-for-profit hospitals, colleges and universities affected by Harvey, said the credit impact will develop over several years.

The severity will depend on the magnitude of property loss, the amount and timing of insurance recovery, and the availability of Federal Emergency Management Agency funds.

While hospitals located in the Texas Medical Center in Houston will be negatively impacted, TMC prepared to weather a hurricane after Tropical Storm Allison in 2001, Moody's said. TMC hospitals invested heavily in hurricane preparedness, including moving generators and other essential power supplies to higher ground and installing massive "submarine" doors to keep floodwaters from spreading through the tunnels under the buildings. The submarine doors were activated during Hurricane Harvey.

Catholic Health Initiatives, with a large operation at TMC, is experiencing financial difficulties, but its multi-state geographic diversification should allow the system to absorb most of the potential damage, the credit ratings service said.

It is likely that hospitals in Dallas, San Antonio and other regional centers will see an uptick in volume from population dislocations, according to Moody's.

Twitter: @SusanJMorse
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