U.S. nonprofit hospitals with larger size and scale may fare better financially in the long term compared to their smaller counterparts, according to a Fitch Ratings analysis released Sept. 27.
For the analysis, titled "Size and Scale Factor into Hospital Ratings," Fitch examined its 240 rated nonprofit hospitals, then self-defined a subset as "large," medium" or "small," to see how increased merger and acquisition activity in healthcare potentially affects nonprofit hospitals' profitability.
"We wanted to get some separation between the three categories to truly highlight the differences," said Fitch Senior Director Kevin Holloran.
Fitch said it found that while consolidation will continue to be part of healthcare as hospitals adapt to industry trends, it does not necessarily mean nonprofit hospitals will immediately see better financial results after a merger or acquisition.
Fitch said it does expect size and scale to matter in the long term, maybe not necessarily in terms of profitability, but in terms of the ability to make it through a future economic downturn unscathed.
"Increased size and scale absolutely enhance a hospital's stability at virtually every measurable data point," said Fitch Senior Director Olga Beck. "With the tools available to them, Fitch expects that in the long run, large systems should be able to prove their advantages by exhibiting less volatility in times of stress and/or acquiring essentiality with a strong clinical reputation in very high-acuity care that provides them with a broad patient base."
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