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.
Federal payment for long-term care is another source of trouble for providers, he added.
"I'm concerned that providers will have fewer places to discharge their patients and that will reverse the long-term trend of improving average length of stay," which has been a great strategy for reducing costs, he said.
Arrick also offered his prediction for health reform.
"So much depends on the details," he said, but ultimately, he thinks, "reform is going to really improve coverage," enabling many of the 30 million people now uninsured to access care. "So obviously, the hospitals with the greater number of uncompensated care burdens would be better off, and will do better under that system."
Suburban hospitals with a better payer mix will not benefit as much, but they will benefit, he said.
Standard & Poors' statements came two weeks after Moody's Investors Service talked about "high downgrade activity" in the nonprofit healthcare market. Moody's added, however, that the ratio between downgrade and upgrade ratings did improve by the end of 2009.