From a ratings expert: Fitch Ratings Senior Director James LeBuhn says the current and future outlook for the not-for-profit hospital and health system sector will hold at stable to negative, which will dampen credit ratings. LeBuhn's perspective on the road ahead for financial leaders might best be summarized as "proceed with caution." Not-for-profit hospital and health systems will endure continued reimbursement pressures, budget issues, consolidation to achieve size and scale, and questions surrounding value-based payment models, he says.
The picture isn't all bleak, though. LeBuhn points to consistent financial stability among many hospitals and health systems in recent years, which he says is a credit to "very strong leadership" as well as solid community support and political ties.
Not unlike many healthcare sector analysts, however, LeBuhn believes that one healthcare segment in particular will be challenged: the standalone hospital. The industry trend toward consolidation in order to achieve a necessary level of size and scale to attain operating efficiency will likely widen the credit gap between large systems and standalones, he says, adding that "The gap is already there."
Outside of standalone facilities, Fitch believes the not-for-profit healthcare sector has some core credit strengths to its credit. Four areas which LeBuhn and his organization say will offset some of the negative economic and legislative pressures influencing ratings are: the essentiality of healthcare services, being the major employer in a community, strong and improving liquidity, and a strong political voice at the state and federal levels.