Outlook is Negative For Not-For-Profit Hospitals

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The health care employment picture may be rosy compared to other sectors, but the outlook for U.S. not-for-profit hospitals is negative, according to a new report from Moody’s Investors Service.

Titled "U.S. Not-for-Profit Hospital Medians Show Resiliency Against Industry Headwinds But Challenges Still Support Negative Outlook”, the report indicates that most such hospitals saw weakening revenue growth in 2010, while simultaneously maintaining stable financial performance and achieving somewhat improved balance sheet positions.

Specifically, the report says, median net patient revenues and total operating revenues slowed to a respective 4.1% and 4.0% in the not-for-profit hospital segment, and continued pressure is anticipated throughout FY 2011. Institutions’ median growth rate of inpatient admissions fell into the negative zone, reaching -0.4% in FY 2010 following no growth in FY 2009.

Several outpatient indicators showed declining growth rates as well. These included emergency room visits, outpatient visits, and outpatient surgeries. Moody’s executives attribute the declining median growth rates for these volume indicators primarily to the persistently sluggish economy as patients postpone care, with a “stubborn” unemployment rate said to translate into greater uncompensated care for hospitals as well.

Moreover, although the 2010 median showed continued growth in government payments into the health care system, uncertainty about health care reform and expectations of inevitable Medicare cuts are on the horizon and support the negative outlook, according to the report.
"The federal deficit will further pressure hospital revenues, and we also expect lower rate increases from commercial payers as they face their own increased regulatory requirements under reform," says Moody’s Vice President and Senior Credit Officer Beth Wexler, who authored the report. "We also expect weaker revenue and volume trends to continue in FY 2011 and FY 2012, leading to a further downturn in the reported median data next year."

On a more positive note, the report reveals, not-for-profit hospitals’ stronger focus on controlling operating spending led to improvement in key FY 2010 operating measures and improved debt coverage ratios. Total cash and investments, along with liquidity metrics, improved as a result of now-likely-tempered stock market gains, decreased capital spending, and moderately higher retained earnings.

To read the press release, click here: http://www.moodys.com/research/Moodys-FY-2010-medians-data-confirm-negat...