Raking In Rebound: 80% of Hospitals in the Black
Now you might think that the improvements in total margin that CHI reported would help the credit scores, and they will, but with all that lay ahead for healthcare, hospital CFOs are going to have to work extra hard to get things to tip in their favor. A few of the challenges S&P is concerned about regarding your credit rating:
- weaker revenues
- declining balance sheets
- a difficult economic environment
- rising pension contributions
- state budget stresses
"We believe that the recession is still taking a toll on the sector," the report says. "Therefore, the negative trends that emerged before the recession have now worsened with operational and non-operational losses increasing, resulting in diminished margins as well as weaker debt service coverage."
The S&P assessment also gives mention to the slower revenue growth, increasing levels of uncompensated care and bad debt, expense pressures (e.g., higher capital-related costs and softer volumes), and last (but by no means least) is Medicaid funding challenges, higher levels of uncompensated care and weaker revenues.
Not doubt about it, the CHI findings are very promising, but CFOs had better be prepared for a lot of financial flurry in 2010. I suggest that if you've managed to get your total margins under control that you get your shovel out now (and remember, bend with your knees and not at the waist, because with all you have on your hands, you can't afford throw your back out).
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Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.
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