Nonprofit hospitals maintain stable outlook in Moody’s report
Moody’s Investor Service projects nonprofit hospitals and health systems will remain stable in 2017, despite uncertainty caused by the results of the presidential and congressional elections.
The outlook said cash flow growth in the sector will be modest compared to 2015 and 2016.
"Following two years of extraordinary growth associated with expansion under the Affordable Care Act, hospital operating cash flow has moderated to 0 to 1 percent,” said Moody’s senior analyst Eva Bogaty. “Top-line revenue growth continues to be strong, but constrained increases in reimbursement rates and rising expenses will counteract that growth.”
Patient volume is expected to stabilize at 1 percent as and new markets, like urgent care and retail clinics, continue to emerge, and the insurance gains associated with the Affordable Care Act (ACA) taper off. The uncertainty around the ACA after the election of President-elect Donald Trump is reflected in the report, offering a scenario for a negative outlook in the near future.
“The stable outlook incorporates the expectation of some near-term uncertainty around the future of the (ACA) given President-Elect Trump's calls for a ‘market-based alternative.’ While it may keep some facets of the ACA intact, an increase in uninsured volumes would be negative for the nonprofit healthcare sector if Medicaid expansion and the exchanges are not replaced,” the report said.
The sector can make gains in several areas, according to the report, like acquiring physician practices to support growth in patient volume.
“Moody's would consider changing the outlook to positive amid the anticipation of sustained operating cash flow growth above 4 percent over a 12 to 18-month period, after accounting for healthcare inflation,” the report said.
Besides the ACA concerns, expenses from rising drug prices and paying for more personnel and technology to handle the transition to value-based care could put a strain on operating margins, possibly leading to a negative outlook.
John joined TriMed in 2016, focusing on healthcare policy and regulation. After graduating from Columbia College Chicago, he worked at FM News Chicago and Rivet News Radio, and worked on the state government and politics beat for the Illinois Radio Network. Outside of work, you may find him adding to his never-ending graphic novel collection.