Over the next 12 to 18 months, for-profit hospital companies like Hospital Corporation of America and Community Health Systems should see modest EBITDA growth due in large part to the expanded health coverage under the Patient Protection and Affordable Care Act, according to a report from Moody's Investors Service.
Moody's officials said 2013 will be a modest year for the for-profit operators, expecting same-facility aggregate EBITDA to remain flat or grow by up to 0.5 percent. This is mostly due to weak admission volumes, fewer commercial patients and increased bad debts that will hamper earnings. The 2 percent cuts to Medicare via sequestration are also likely to dig into the chains' profitability.
However, for-profit hospitals are likely to stay active in the merger and acquisition market to maintain profit margins, and next year will provide the much-awaited influx of newly insured patients, which will reduce uncompensated care costs.
"Volumes and pricing should see more positive momentum in 2014, as the provisions of the Patient Protection and Affordable Care Act start to kick in, including, most importantly, the expansion of coverage to approximately 27 million individuals currently without insurance," said Dean Diaz, vice president and senior credit officer.
Moody's report comes on the heels of a similar analysis from Standard & Poor's Ratings Services. S&P analysts likewise believe for-profit hospital companies have stable futures despite the fiscal challenges in the industry.
Moody's officials said 2013 will be a modest year for the for-profit operators, expecting same-facility aggregate EBITDA to remain flat or grow by up to 0.5 percent. This is mostly due to weak admission volumes, fewer commercial patients and increased bad debts that will hamper earnings. The 2 percent cuts to Medicare via sequestration are also likely to dig into the chains' profitability.
However, for-profit hospitals are likely to stay active in the merger and acquisition market to maintain profit margins, and next year will provide the much-awaited influx of newly insured patients, which will reduce uncompensated care costs.
"Volumes and pricing should see more positive momentum in 2014, as the provisions of the Patient Protection and Affordable Care Act start to kick in, including, most importantly, the expansion of coverage to approximately 27 million individuals currently without insurance," said Dean Diaz, vice president and senior credit officer.
Moody's report comes on the heels of a similar analysis from Standard & Poor's Ratings Services. S&P analysts likewise believe for-profit hospital companies have stable futures despite the fiscal challenges in the industry.
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