Not-for-Profit Hospitals Show Stability in a Challenging Market

Even with flat inpatient admissions in FY2011, not-for-profit hospitals recorded a median expense growth rate of 5% against a median revenue growth rate of 5.3%. That represents a slight uptick from FY2010, which saw revenue and expense growth rates of 4.2% and 4.1%, respectively.

Vennekotter anticipates continuing challenges in FY2013, including lower payments for inpatient procedures from all payers as incentives and mandates for efficiency and quality move more patients to outpatient settings. For example, the median growth rate in observation stays has continued to improve incrementally each year, from 7.4% in FY2008 to 8.2% in FY2011.

"Growth in observation stays has been strong in the last couple of years," Vennekotter says. "That's because Medicare [Recovery Audit Contractor] audits have come in and hospitals have been forced to reevaluate how they document and code patient care when, for example, they come to the ER. We will continue to see that as Medicare continues to monitor hospitals to ensure that they are properly coding inpatient admissions and observation stays."

Other financial pressures in FY 2013 will include the ongoing federal budget woes, which will probably mean more Medicare and Medicaid reductions for hospitals on a per-patient basis. In addition, margins are likely to weaken as hospitals contend with losses on employed physician strategies.