The delay or potential expiration of permanent federal funding for the Children's Health Insurance Program would be a credit negative for children's hospitals, according to Moody's Investors Service.
Future funding for CHIP has been uncertain since federal monies for the program expired Sept. 30. Congress approved $2.85 billion in short-term CHIP funding in December. House Republicans proposed a longer-term fix Tuesday via a new stopgap funding bill that includes six years of funding for CHIP, but it remains to be seen whether Congress will pass the bill.
If permanent CHIP funding expires or is delayed, it would be a credit negative for children's hospitals because they will have pay for providing healthcare to more uninsured patients, according to Moody's.
"A short-term funding disruption in CHIP would not have long lasting negative credit implications because most children's hospitals have strong liquidity and cash flow to temporarily absorb higher uncompensated care. The program's long history of renewals and bipartisan support suggests it will ultimately be extended or renewed," said Moody's. "However, the expiration of CHIP or prolonged funding delays would have a more material effect on hospital margins, depending on how quickly a state depletes CHIP funding and its response. Hospitals with high Medicaid exposure in states running out of funds in the near-term are most at risk. States that replace federal funding will buffer the effect on hospitals."
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