Moody's: Sequestration Threatens Not-For-Profit Hospitals
The 2% Medicare reimbursement cuts mandated by the federal sequestration over the next 10 years pose a big threat to not-for-profit hospitals, says a report from Moody's Investors Service.
In its report, "The Sequester Series: Sequestration's Medicare Reductions Present New Headwinds for Not-for-Profit Hospitals," Moody's finds that not-for-profit hospitals are generally vulnerable to the cuts because they rely heavily on Medicare reimbursements. Hospitals are especially at risk if they have not already budgeted for the cuts or made spending adjustments in preparation for reduced Medicare payments.
"Among all Moody's-rated not-for-profit hospitals, Medicare reimbursements accounted for a median 43.7% of gross patient revenues in 2011, a percentage that has risen steadily for several years. Barring material Medicare reform, this percentage will continue to increase as the U.S. population ages and becomes eligible for Medicare whilst increasing their utilization of healthcare services," says the report.
Sequestration mandates roughly $1.2 trillion in spending cuts over the next decade with $85 billion of those cuts to take place by October. The Centers for Medicare & Medicaid Services estimates that it will reduce reimbursements to healthcare providers by $11 billion in 2013.
"The cuts exacerbate an already challenging operating environment for not-for-profit hospitals as many already face low revenue growth from both governmental and private insurance payers," the report notes.
Sarah Vennekotter, Moody's assistant vice president and analyst and lead author of the report, says not-for-profit hospitals are at financial risk because Medicare is typically their largest payer and more payment reductions are on the horizon.
- CEO Exchange: Preparing for Population Health
- EHR Systems 'Immature, Costly,' AMA Says
- Better HCAHPS Scores Protect Revenue
- Advocate, NorthShore Deal Would Create 16-Hospital System
- Narrow Networks Cut Costs, Not Quality, Economists Say
- 3 Strategies for Retaining Millennial Employees
- Interstate Medical Licensure Effort Advances
- 'Early Offer' Malpractice Programs May Spur Reform
- Two NY hospitals to offer free hip and knee replacement surgeries for qualifying patients in December
- Power of price: In South FL and the nation, healthcare costs often are shrouded in secrecy