With hundreds of millions of dollars worth of construction transforming area health-care systems, it sure looks like the best of times for the hospital business.

New cancer wings are being built. Expensive diagnostic equipment is on order. Entirely new hospitals are planned by Albert Einstein Healthcare Network in Montgomery County, and Virtua Health Inc. in South Jersey.

It's reminiscent of the '90s when the big hospital systems engaged in an arms race for doctors' practices and rushed to buy or affiliate with independent hospitals.

Then, the competitive frenzy produced a $2 billion statewide colossus called Allegheny Health & Education Research Foundation. Ten years ago, Allegheny filed for bankruptcy in Pittsburgh.

Moody's Investor Service, a credit-rating bureau that tracks nonprofit hospitals, marked the anniversary by issuing a report on Monday that asks, "What have we learned?"

Allegheny's collapse remains the nation's biggest bankruptcy by a nonprofit health system. In several ways, Philadelphia is still dealing with the fallout.

When it filed Chapter 11 on July 21, 1998, Allegheny had nine hospitals in this region. Tenet Healthcare Corp., which bought the local hospitals, now runs only two of them: Hahnemann University Hospital and St. Christopher's Hospital for Children.

The rest were either closed or sold as the for-profit Tenet struggled with its own financial chaos.

In Allegheny, you had some familiar ingredients: A CEO - Sherif S. Abdelhak - with outsize ambition. A board that failed to rein him in. Rapid growth that overwhelmed information systems and financial stability.

Just replace "Allegheny" with "Enron" or "WorldCom", and you're following the recipe for Meltdown Casserole.

Moody's calls the collapse "a cautionary tale for today as hospitals currently face a growing number of industry-wide pressures."

One is that hospitals now receive about half of their revenues from Medicare and Medicaid. That gives government a "disproportionate impact" on the financial condition of hospitals, Moody's says.

Given the economic slowdown and tight budget constraints facing many states, there's a good chance the government programs will consider cutting hospital rates as they did in 1998.

Among the lessons Moody's hopes today's hospital boards have learned are the need for strong governance, disciplined growth and better disclosure of financial performance.

Quotable

"I’m not sure if there's anyone not affected by higher energy prices. It's still a supply and demand issue and we can't fix that now. It's going to take time."

- Richard Sichel, chief investment officer of Philadelphia Trust Co. tells Bloomberg News.