Moody's Still Bearish on Not-for-Profit Hospitals

John Commins, for HealthLeaders Media , January 28, 2013

For the fifth consecutive year, Moody's Investors Service has issued a negative credit outlook for the nation's not-for-profit hospitals in 2013, with revenue growth expected to continue for the sector but margins getting leaner.

The sector hasn't been stable since at least 2008, and Daniel Steingart, a Moody's Assistant Vice President and analyst, says there is no indication that anything is going to change for the better anytime soon.

"I don't want to say that this is the ‘new normal' but there is so much uncertainty out there and the balance of the factors we see are negative," Steingart told HealthLeaders Media. "We need some more clarity around some of those items and see them hopefully resolved in a more favorable light to go back to a stable outlook."

Those items include the likelihood that the federal government will trim reimbursements for Medicare and other healthcare spending in the name of deficit reduction, and that tepid economic growth and related elevated unemployment levels will dampen demand for healthcare services.

Hospitals already face more than $300 billion in reductions to Medicare through 2019 as part of healthcare reform. Steingart says additional cuts to hospitals will likely be part of any legislation intended to reduce the long-term federal deficit.

"There is a lot of uncertainty about where Medicare rates are going to go," Steingart says. "Our view is that, whatever legislation that comes out dealing with the federal deficit, both sides want to cut Medicare in some form or another. Right now they may be far apart in their proposals but they are both proposing some sort of cut."

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