Analysts are expecting these organizations to have a rocky rest of the year.
Fitch Ratings has revised its outlook for U.S. not-for-profit hospitals and health systems to "deteriorating" as these organizations continue to be hammered by labor issues, expenses, and "macro inflationary pressures."
"While severe volume disruption to operations appears to be waning, elevated expense pressure remains pronounced," Fitch Ratings Senior Director Kevin Holloran said in the report. "Even if macro inflation cools, labor expenses may be reset at a permanently higher level for the rest of 2022 and likely well beyond."
Several hospitals and health systems reported lackluster earnings results for the most recent quarter, as these factors, particularly labor issues and expenses, don’t show any signs of abating anytime soon.
"Hospitals are in a challenging position," Erik Swanson, senior vice president of data analytics at Kaufman Hall, recently told HealthLeaders. "Organizations are not expecting that these expenses will go back down anytime soon to pre-pandemic levels, they will remain elevated."
Stressors in the labor sector will be most felt in the nursing units, according to the Fitch Ratings report. Hospitals and health systems had been dealing with a nursing shortage well before the pandemic started, however, COVID-19 has only exacerbated this problem.
Fitch Ratings had anticipated these macro headwinds heading into 2022, but they have been stronger than expected, the credit rating agency said. Fitch Ratings is preparing for the event it will downgrade ratings for several not-for-profit hospitals throughout the remainder of the year.
"While liquidity growth through much of 2021 provides a good cushion for many providers to weather the current environment, ongoing macro pressures will result in elevated volatility," the report says. "Moreover, the sector is facing asset price corrections that are compressing balance sheets from previous highs. As a result, deteriorating conditions will be present for the rest of 2022 and into 2023, as labor expenses remain elevated."
Amanda Schiavo is the Finance Editor for HealthLeaders.