Earlier this month, the Florida legislature passed the state budget for 2012-2013, and the 5.6 percent reduction in Medicaid rates to hospitals could be considered an "unequivocal credit negative" for all hospitals in the state, especially non-profits, according to a recent credit outlook report from Moody's Investors Service.
Moody's issued the credit negative, particularly for Florida's non-profit hospitals, because non-profit hospitals tend to see more Medicaid patients. In addition, Florida hospitals already witnessed Medicaid rate reductions of 12 percent in fiscal year 2011.
The average operating margin for non-profit hospitals in Florida dropped from 3.1 percent in FY 2009 to 2.3 percent in FY 2011. The number of Medicaid beneficiaries is also increasing in the state as unemployment remains above the national average. As Medicaid increases as a percent of gross revenues for a hospital, the more it negatively impacts a hospital's operating margin.
"The recent Medicaid cuts in Florida will put additional pressure on revenue growth, and significant expense reductions will be required in order for hospitals to maintain profitability," Moody's analysts wrote in the report.
Moody's issued the credit negative, particularly for Florida's non-profit hospitals, because non-profit hospitals tend to see more Medicaid patients. In addition, Florida hospitals already witnessed Medicaid rate reductions of 12 percent in fiscal year 2011.
The average operating margin for non-profit hospitals in Florida dropped from 3.1 percent in FY 2009 to 2.3 percent in FY 2011. The number of Medicaid beneficiaries is also increasing in the state as unemployment remains above the national average. As Medicaid increases as a percent of gross revenues for a hospital, the more it negatively impacts a hospital's operating margin.
"The recent Medicaid cuts in Florida will put additional pressure on revenue growth, and significant expense reductions will be required in order for hospitals to maintain profitability," Moody's analysts wrote in the report.
More Articles on Hospital Credit:
Fitch Analysts Don't Expect PPACA Ruling to Affect Healthcare Ratings
7 Hospitals Receive Credit Downgrades in Past Month
Moody's Uses New Scorecard for Non-Profit Hospital Credit Ratings