2024 will be make or break for nonprofit hospitals, says Fitch Ratings.
The outlook is still “deteriorating” for 2024 as staffing shortages and rising inflation is putting the pressure on nonprofit hospitals, according to a recent report from Fitch Ratings.
On top of this, Fitch says downgrades and negative outlooks will likely continue to outpace upgrades and positive outlooks.
Out of these ongoing struggles has emerged a “trifurcation” of credit quality that will only become more prominent in 2024, the report said.
“Much of a hospital’s ability to be successful, will depend on their ability to recruit and retain staff in the currently hyper-competitive landscape for personnel,” said Fitch senior director and sector head Kevin Holloran.
So what does this really mean for CFOs of nonprofits? There are a few key takeaways that CFOs can utilize to remain financially stable in 2024:
Managing salary, wages, and benefits is crucial.
The report highlights that managing the largest single expense for healthcare providers, which is salary, wages, and benefits, is the most important factor for operational success in 2024. CFOs should focus on attracting and retaining staff at all levels to reduce usage and cost per hour of external contract labor, leading to cost savings.
Labor shortages remain a challenge.
The industry continues to struggle with labor shortages, which have been a significant pressure point in recent years. CFOs should anticipate that this shortage will persist in the foreseeable future, potentially impacting operating metrics. Developing strategies to address this challenge and mitigate its effect on operations and financial stability will be crucial.
Incremental operational recovery expected in 2024.
While overall labor supply shortage and financial pressures are expected to continue, the report suggests that there will be incremental operational recovery in 2024. CFOs should plan for this recovery and work towards gradually improving financial performance by addressing key challenges and implementing strategies that align with industry trends.
Some providers may lag behind.
The report also cautions that not all healthcare providers will experience the same level of recovery. Fitch expects a number of providers to lag significantly behind in their operational and financial recovery. CFOs should assess their organization's unique circumstances and actively work to prevent falling behind by prioritizing financial stability and growth initiatives.
Amanda Norris is the Director of Content for HealthLeaders.
KEY TAKEAWAYS
Nonprofit hospitals are in for a challenging 2024, say Fitch.
But what does this really mean for CFOs of nonprofits? There are a few key takeaways that CFOs can utilize to remain financially stable in 2024.