August 6, 2012 / 3:27 PM / 5 years ago

Massachusetts healthcare law may hurt hospital ratings-Moody's

Aug 6 (Reuters) - Moody’s Investors Service said Massachusetts legislation aimed at curbing healthcare costs, to be signed into law on Monday, may put a strain on hospitals’ credit ratings because it will hamper their revenue growth.

Lawmakers passed the legislation last week, making Massachusetts the first state in the nation to curb how much providers and insurers can spend on medical care, and putting the state on course to save up to $200 billion over 15 years.

The law will limit revenue growth and reduce operating flexibility for hospitals in the state, Moody’s said.

The bill also allows the state to use an excise tax on insurance companies to support smaller, less profitable facilities, “potentially allowing them to remain in business longer than would otherwise be possible and limiting the ability of larger systems to consolidate and grow through acquisitions,” Moody’s said.

Massachusetts plans to save money by pegging any increase in healthcare costs to the growth rate of the state economy through 2017. In the following five years, spending would be further constrained to half a percentage point below the growth of the state economy.

Moody’s said it could have been even worse for hospitals, but a “luxury tax” on the most expensive providers was cut from the final version of the bill.

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