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Not-for-Profit Provider Outlook 'Negative,' Says Moody's

John Commins, for HealthLeaders Media, January 27, 2012

"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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1 comments on "Not-for-Profit Provider Outlook 'Negative,' Says Moody's"


bob (1/27/2012 at 9:45 AM)
I share Bruce McPherson's optimism. Clearly, there will be less income, but that is a necessary good thing for the economy, especially when leading providers are able to reduce expenditures without adverse impact on access as well as positive impact on quality....like so many are demonstrating.