Nonprofit children's hospitals will likely remain financially stable for another year or two, although healthcare reform and reliance on government funding could present long-term challenges, according to a Standard & Poor's report.
For most nonprofit children's hospitals, median ratios for fiscal year 2013 either stayed strong or improved compared with the previous year, according to the report. Hospitals in the subsector continue to focus on new and expanded services and markets to bolster their business positions.
S&P rates 21 standalone independent children's hospitals. Their ratings are generally high, with 90 percent of the group rated "A-" or higher (compared with 54 percent for all acute-care hospitals). Additionally, approximately 85 percent of children's hospital credit ratings have a stable outlook.
However, looking beyond the next couple of years, S&P expects healthcare reform could create uncertainty and present challenges for nonprofit children's hospitals seeking to maintain their niche business position. "As networks and ACOs join with selective provider groups, it is possible that
some hospitals could be negatively affected, leading to both volume and revenue declines," the report states. "We are concerned that children's hospitals may be 'price takers' in a broader health market that rewards networks more on global metrics and price. On the other hand, there may be opportunities for high-quality children's hospitals with low costs to assume a national business position by negotiating with insurance companies to be a provider of choice."
Furthermore, pediatric hospitals' general reliance on government funding in the form of Medicaid reimbursement presents a continuing financial risk, especially as many states seek to revamp their Medicaid programs to make expansion possible, according to the report.