Although nonprofit hospitals continued to have strong balance sheets in fiscal year 2012, many financial performance indicators were weak compared with the three years prior, according to a report from Moody's Investors Service.
In 2012, Moody's found that expenses grew faster than revenue across its portfolio of more than 400 hospitals — the first time that has occurred since FY 2008, when the nation began to enter the recession. Overall, median operating revenue growth dropped from 5.4 percent in 2011 to 5.2 percent in 2012. Net patient revenue growth dropped to 4.7 percent, more than a half-percent lower from 2011.
Moody's attributed the "weakening" metrics in 2012 to lower volumes from patients deferring care, increased Medicare and Medicaid exposure, rising expenses and an overall slow economic recovery. The increased expense growth caught Moody's analysts' eyes, in particular.
"Many hospitals incurred higher expenses associated with information technology, physician alignment, supplies and pharmaceuticals and pensions," said Deepa Patel, Moody's assistant vice president and analyst, in a news release. "Some also had higher consulting, legal and other fees associated with mergers and acquisitions, debt restructurings and performance improvement initiatives."
Moody's results were mostly comparable with median reports released by the two other major credit rating agencies. Standard & Poor's Ratings Services and Fitch Ratings both had similar outlooks to Moody's, saying hospital medians in 2013 are likely to be much weaker. However, S&P and Fitch said hospitals' financial performances last year were overall stable and positive, considering the pressures the industry is facing.
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