Not-for-Profit Provider Outlook 'Negative,' Says Moody's
"Some of it is going to hinge on what happens with the economic recovery because that is underlying a lot of these pressures. To the extent the economy picks up that would be a primary factor driving a more stable environment," Martin told HealthLeaders Media.
Moody's cited several "negative factors supporting the outlook," including:
- Pressures on hospital revenues coming from a variety of sources, including Medicare, Medicaid, and commercial payers
- The myriad challenges brought on by healthcare reform, including the transition to a new care delivery model and the uncertainties that come with it, and the increase in physician employment
- The soft economy, which will continue trends in lower utilization, high unemployment, and increase reliance on charity care, self-pay, and government payers.
- Ongoing investment losses caused by volatile bond and equity markets, pension fund obligations, increased capital spending funded with cash reserves, increased exposure to non-cancelable operating leases, and negative valuation of swap portfolios.
All is not lost, however. Moody's identified several positive trends in the sector that may someday help to restore a positive outlook. Those trends include:
- Mergers and acquisitions that generally strengthen health system balance sheets, improve efficiencies, and provide an exit strategy for bond holders
- Historically low interest rates and low expense growth
- Improved management and governance,
- Growth in state-administered provider fee programs that create short-term relief from Medicaid reimbursement cuts
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