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S&P: Healthcare Getting a Grip on Expenses

Karen Minich-Pourshadi, for HealthLeaders Media, July 5, 2011

Reform, the economy, and how they will affect your access to capital—it's a provocative topic for healthcare financial leaders and one that Standard and Poor's knows well. Although financial leaders might expect a negative account of these areas, in actuality, similar to the findings in my column last week, the picture is rosier than many realize.

"There have been a couple of periods in the financial community where you felt like the end of the world is here," Martin Arrick, managing director for the non-profit healthcare ratings division of S&P said at last week's 2011 Healthcare Financial Management Association annual meeting in Orlando, FL.

It took the healthcare sector a couple of years to recover from the 1990s downturn, but that period was followed by a "wonderful" decade, he said. That is, "until we had the end of the world again in 2008."

But the current state of healthcare finances isn't as bad as many in healthcare believe, he added. In fact, the economic downturn may have sparked financial leaders into taking actions that, in some instances, put hospitals and health systems on better financial footing.

"Right now [S&P] upgrades are exceeding the downgrades, and half the people we are seeing are doing better. And in some cases we're seeing [margin] numbers that match the 2006 peaks," he said.

But all is not bright. Unfortunately, although healthcare leaders may be getting a handle on expenses, S&P isn't so sure about the U.S. government and its grip on the overall economy. Arrick explained that in April his rating agency actually changed the outlook projection for the U.S. economy from "stable" to "negative" (although our country still maintains its "AAA" rating).

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