Weaker Finances Seen for Not-for-Profit Hospitals
With many of those efficiencies already cooked into hospital operations, Gacka says additional savings may be more difficult to realize.
"From our perspective in discussions with management, this has been going on for a number of years so you get to the point of how much longer you can take those things. Some of the low-hanging fruit is picked so it gets to the next level of additional efficiencies," he says.
"In a lot of our discussions with management they recognize that and they are looking to really getting lean methodologies implemented in operations as well as looking for cutting the fat from the systems in terms of clinical variations, differences in practice, to get the harder-to-get structural savings out of the organizations."
Some stand-alone providers in particular are experiencing weakening financial operating performance even in the face of revenue growth, a trend that S&P believes will be exacerbated with further declines in utilization, smaller rate increase for services, and continued investment in technology and physician compensation.
In such an environment, Gacka says he expects to see continued mergers and acquisitions in the not-for-profit hospital sector.
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