Moody's Investors Services has maintained its negative outlook for non-profit hospitals for the remainder of 2012, as most of the challenges outlined in January are expected to persist, according to the rating agency's mid-year outlook report.
Moody's analysts highlighted three established risks and three developing risks for non-profit hospitals.
1. Revenue growth. Revenues are low compared with other recent years, and non-profits will continue to struggle with revenue growth as CMS lowers annual Medicare increases and adopts to reimbursement strategies.
2. New payment methodologies. Bundled payments and quality-based reimbursements are requiring hospitals to reconfigure how they should coordinate care, and they are running counter to the current fee-for-service environment.
3. Sluggish economy. Slow economic growth and prevailing high unemployment rates are leading to slower patient demand, which directly impacts hospitals' balance sheets.
1. Medicaid expansion. The Supreme Court's ruling that states could opt out of the healthcare reform law's Medicaid expansion "weakens the impact of one of the most credit positive aspects of the law, the expansion of insurance coverage," according to the report.
2. Hospital-insurer collaboration. Hospitals are increasingly acquiring or collaborating with health insurers to become true health systems, but this means hospitals are taking on the revenue risks normally associated with health insurers.
3. Growing acquisition of physician practices. Non-profit hospital acquisitions of physician practices and other provider organizations is not new, but it is still an increased financial risk as these practices require big subsidies to keep operations going and invest in health information technology.
Moody's analysts highlighted three established risks and three developing risks for non-profit hospitals.
Established risks
1. Revenue growth. Revenues are low compared with other recent years, and non-profits will continue to struggle with revenue growth as CMS lowers annual Medicare increases and adopts to reimbursement strategies.
2. New payment methodologies. Bundled payments and quality-based reimbursements are requiring hospitals to reconfigure how they should coordinate care, and they are running counter to the current fee-for-service environment.
3. Sluggish economy. Slow economic growth and prevailing high unemployment rates are leading to slower patient demand, which directly impacts hospitals' balance sheets.
Developing risks
1. Medicaid expansion. The Supreme Court's ruling that states could opt out of the healthcare reform law's Medicaid expansion "weakens the impact of one of the most credit positive aspects of the law, the expansion of insurance coverage," according to the report.
2. Hospital-insurer collaboration. Hospitals are increasingly acquiring or collaborating with health insurers to become true health systems, but this means hospitals are taking on the revenue risks normally associated with health insurers.
3. Growing acquisition of physician practices. Non-profit hospital acquisitions of physician practices and other provider organizations is not new, but it is still an increased financial risk as these practices require big subsidies to keep operations going and invest in health information technology.
More Articles on Moody's Reports:
Moody's: 2.8% Increase in Medicare Inpatient Rates a Positive for Hospitals
Moody's to Review Beebe Medical Center's Bond Rating Amid Class Action Lawsuit
Moody's: New Massachusetts Law Will Hinder Hospitals' Revenue Growth