Moody’s Upgrades Not-for-Profit Hospitals’ Outlook to ‘Stable’
Moody's Investors Service has upgraded not-for-profit hospitals from a "negative" to a "stable" outlook, according to a report released Wednesday, Modern Healthcare reports. The upgrade marks the first time such hospitals have had a stable outlook since 2008.
Moody's noted that not-for-profit hospitals are benefitting from larger patient volumes and a decline in bad debt. Moody's noted the effects are greater in states that have expanded Medicaid. According to the report, uninsured patients accounted for 3.8% of not-for-profit hospitals' revenue in expansion states, compared with 9.2% in states that have not expanded Medicaid.
While not-for-profit hospitals have faced flat or falling admissions since roughly 2009, they began to see larger patient volumes in late 2014. Moody's cited various factors for the increase, such as:
- A particularly virulent influenza season;
- Employment growth; and
- Pent-up demand among patients who previously had been uninsured.
These factors have helped not-for-profits to reach a multiyear high in growth of operating cash flow, according to the report. Moody's noted that operating cash flow increased by 12.3% in 2014, compared with 0.3% growth in 2013. Operating cash flow for not-for-profits increased by 11.5% during the first quarter of 2015, according to Modern Healthcare.
Overall, Moody's said financial improvement resulted from increased revenue and the hospitals' success at managing labor and supply expenses.
Growth Could Be Temporary
Moody's warned that the improved financial outlook could be temporary, likely lasting for the next 12 to 18 months. The effect could be short-lived as hospitals are making large investments in:
- Building lower-acuity care settings;
- Population health management, which could eventually decrease utilization;
- Purchasing physician practices; and
- Upgrading health IT systems.
Further, hospitals face increased competition, particularly from retail-based clinics (Kutscher, Modern Healthcare, 8/26).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.