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Weaker Finances Seen for Not-for-Profit Hospitals

John Commins, for HealthLeaders Media, August 12, 2013

The not-for-profit healthcare sector will likely see softening median ratios in 2013, says a Standard & Poor's Rating Services analyst. With many efficiencies already factored into healthcare system operations, additional savings may be difficult to realize.

Not-for-profit hospitals and healthcare systems struck a careful balance in 2012 with improved operational efficiencies that offset growing costs, lower volumes, and other financial pressures. However, that balance may be harder to sustain in 2013 and beyond, Standard & Poor's Rating Services says.

With that in mind, S&P analyst Kenneth T. Gacka says the not-for-profit healthcare sector will likely see weakened median ratios in 2013 in the face of those continuing and growing incremental pressures that include healthcare reform.

"The 2012 medians reflect a continuation of the peak in metrics reached in 2011, but we expect ratios to soften gradually in the next one to two years as incremental pressures persist and even intensify amid industry changes related to healthcare reform," Gacka says.

Gacka says many of the 144 health systems and 409 stand-alone providers rated by S&P over the past few years have undertaken many of the standard belt-tightening measures that have been seen across the healthcare sector, especially around staffing.

"Some places have had reductions in force, or they're not filling vacant positions, or there is a real focus on full time employee management and making sure that hospitals are efficiently flexing their variable staff to volume trends. Those aren't really new to the healthcare industry. Folks have been doing that for a long time and continue to do that… in addition to some of the non-salary things like renegotiating your supply contracts or different vendor contracts."

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