Hospitals fight to hold on to independence

Doylestown is unusual in that it is owned by a community group, the Village Improvement Association of Doylestown, as opposed to being a freestanding nonprofit entity.

"That doesn't sound like a group that wants to give up control," said Michael D. Rosko, a professor of health-care management at Widener University.

But Doylestown's above-average reliance on Medicare could make it vulnerable, Rosko said: "With potential Medicare cutbacks down the road, that could be really threatening to them. That could be the thing that pushes them over."

Reif said Doylestown Hospital has a demonstration project with the Centers for Medicare & Medicaid Services "that dramatically improves outcomes and saves money."

Moody's Investors Service, however, has a negative outlook on $139.4 million of Doylestown Hospital debt, citing erratic operating performance during the last five fiscal years and a substantial decline in inpatient admissions during that period. Strengths, according to Moody's, include strong market share in the wealthy Central Bucks area and proactive moves by management to reduce expenses.

Moody's also has a negative outlook on Chester County Hospital, which recently borrowed $37 million from Fulton Bank for a new building after skipping a planned bond offering in the spring because interest on the bonds would have been more than 7 percent. The interest rate on the five-year Fulton loan that can be rolled over is 3.25 percent, chief financial officer Kenneth Flickinger said.

Duncan, the hospital's CEO, discounted the concerns Moody's raised in its report last month, citing the New York credit-rating agency's lack of rigor in giving top ratings to complicated mortgage-related bonds during the housing bubble.

"I think they are doing what is sort of natural," Duncan said, "they are overcorrecting."

Contact staff writer Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.