The promise of millions of newly insured patients has yet to be realized even as other healthcare reform changes that push care into the less costly outpatient setting are impacting revenues and cash flow notes Moody’s Investor Service in its latest report on the not-for-profit hospital sector.

According to the report, revenue growth and cash flow margins for the not-for-profit hospitals it tracks hit all-time lows in fiscal 2013. Operating revenue growth dropped to 3.9 percent while expenses outpaced revenue growth for a second consecutive year, a situation Moody’s called “unsustainable.” With more money going out than coming in, the average operating cash flow margin for tracked not-for-profit hospitals is now just 9 percent, Moody’s said.

The report “Revenue Growth and Cash Flow Margins Hit All-Time Lows in 2013 US Not-for-Profit Hospital Medians,” also notes that the shift to lower-reimbursed outpatient visits and observations stays from inpatient admissions has played a big role in the slowdown in revenue growth. The 2013 medians show inpatient admissions now declining at -1.3 percent after flat inpatient admission growth since 2009. Meanwhile, outpatient admissions slowed for the first time in 2013, a fact Moody’s attributed to a decrease in demand for healthcare services overall but which might also be due to efforts to better manage chronic diseases and reduce preventable short-stay admissions, such as those due to medication mistakes or socio-economic factors like unstable housing or lack of community/family support.

Whatever the cause, the slowdown in revenue growth to 3.9 percent was a big drop from the 5.1 percent growth recorded in 2012 and from historical growth rates that typically exceeded 7 percent.

“We expect revenue growth will remain under pressure in 2014,” said Moody’s analyst Jennifer Ewing in a press relase.  “We expect continued financial weakening due to volume declines in a predominantly fee for service environment, reinforcing our negative outlook on business conditions for not-for-profit hospitals.”

Moody’s did note that once more people get health insurance either through Medicaid expansion or to comply with the individual mandate in the Affordable Care Act, in-patient admission rates could begin to rise again. However, this would likely not appear until sometime next year.

New patients might also be on poorly-reimbursing government plans or private plans with high co-pays that patients may be unable to cover their share of. In addition, as the population ages, more patients are becoming eligible for Medicare and the shift in patient volumes from commercial payors to Medicare was another factor Moody’s noted as slowing revenue growth in 2013.

One positive trend from the report was that hospital liquidity was up as the not-for-profits have cut back on capital spending at the same time as their returns on equity investments were strong.