Moody’s special report confirms importance of hospitals diversifying

It’s not quite “diversify or die,” but a new report from Moody’s Investors Service on the not-for-profit hospital sector does stress the need for hospitals to expand into outpatient services, along with making investments in efficiency and information technology.

In the report “Building Value: Investments Aimed at New Priorities Create Opportunities for Not-For-Profit Hospitals,” experts at the New York-based financial firm note that the decline in inpatient volumes seen over the past several quarters is no fluke but rather a long-term trend driven by health reform. This means that hospitals that want to remain successful need to look beyond just inpatient services and become full-service health systems that are able to follow the patients to the lower cost and frequently higher value outpatient setting.

“Hospital systems that can supplement inpatient revenue with new, diversified revenue streams are more likely to remain successful and enhance consumer value,” stated Brad Spielman, a Moody’s vice president and senior credit officer in a press release. “These investments are generally less expensive than building inpatient capacity and can help mitigate inpatient utilization declines.”

However, the report also notes that expanding into outpatient care has some risks for hospital operators. With lower reimbursement for services, care must be efficient and there is increased competition from new nontraditional healthcare service providers, such as by drug stores that expand into nurse-staffed clinics.

“As the dominant healthcare model in the country shifts from volume to value, income pressures will increase, putting hospitals’ income statements at further risk,” Spielman stated.