Nonprofit Providers' Financial Status Improving, Says S&P

Cheryl Clark, March 3, 2010

Nonprofit healthcare organizations are demonstrating more financial stability in 2010 than they did in 2009, said Martin Arrick, managing director for U.S. not-for-profit healthcare for Standard & Poors Rating Services.

"Right now, there's a little bit of an island of calm," he said. "We're beginning to see a lot of providers come in with numbers that are definitely better than last year and [they] show real foresight in trying to manage their cash flow."

Investment income, while not back to its levels of two or three years ago, is up as well, he said.

In terms of ratings, Arrick pointed to improvements. For example, in 2009, he said, five ratings were downgraded for every one that was upgraded; in the fourth quarter, the ratio changed to one to one.

But healthcare providers still have lots of issues to worry about: "Payer mix, payer mix and payer mix" are the top three, he said, because the high rates of unemployment translate to a higher number of people without employer-covered health insurance.

"There's been so much written in the business press about unemployment and lack of sustainable job growth that directly impacts many folks who lost jobs," he said.

Expanding Consolidated Omnibus Budget Reconciliation Act (COBRA) eligibility will help, "but a lot of folks will come off COBRA and will be joining the ranks of the uninsured, if they haven't found a job yet," he said.

Medicaid availability is also going to be a problem for providers, as many states curtail their programs by cutting back enrollment, coverage or payments. Those cuts will help the states handle their budget shortfalls, Arrick said, but it won't help hospitals or other health providers.

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