Not-for-profit hospitals are better managed and are learning to do more with less revenue. Now the question is whether or not the sector can continue to find savings in the coming years with much of the low-hanging fruit plucked and an aging demographic increasingly straining resource, Moody's Investors Service says.
Mark Pascaris, vice president and senior analyst at the bond rating agency, says that not-for-profit hospitals will continue to endure a negative credit outlook for the near future because of challenges to top-line revenues.
"The federal government pulling back on Medicare reimbursements, commercial payers becoming tighter in the types of rate increases they give to hospital and health systems year over year— that hasn't changed," Pascaris said in an interview.
"But we believe that as a sector, particularly among the rated hospitals, the management teams have become more focused on expense management and really have weathered the storm coming through the recession and the subsequent anemic economic recovery."
The Congressional Budget Office in February reported that total healthcare spending for the past three years increased at a historically low level of about 4%, which was slightly higher than 3% inflation in 2011 in the overall economy as measured by the Consumer Price Index.