The U.S. nonprofit healthcare sector has, and will continue to, face challenges in terms of declining revenue and volume growth trends, according to 2010 medians data outlined in a Moody’s Investors Service report.
While the report highlighted that most nonprofit hospitals struggled with shrinking revenues last year, the majority were still able to keep afloat and maintain a high standard of care. The report showed that the median grown rate of net patient revenues and total operating revenues decreased to 4.1 percent and 4 percent, respectively, and Moody’s outlined that these numbers are expected to drop in 2011.
Additionally, the report outlined that inpatient admissions dropped 0.4 percent, as did ER visits, outpatient visits and outpatient surgeries.
“The declining median growth rates for these volume indicators are mostly due to the persistently sluggish economy as patients are deferring care,” Moody's Vice President and Senior Credit Officer Beth Wexler, author of the mid-year outlook and medians report, said in a statement. “A stubborn unemployment rate also translates into greater uncompensated care for hospitals.”
While the trend toward weakening revenue growth looks inevitable, Moody’s also expects unemployment to hover above 8 percent through fiscal year 2012, creating even more hurdles.
“Operating pressure in place when the outlook was changed to negative in October 2008 is fully captured in the underlying trends shown in the fiscal year 2010 medians—namely weaker revenue and volume growth trends,” Wexler said.
Healthcare reform has left hospitals with much uncertainty, and the expected hefty Medicare cuts will add to the gloomy outlook.
“The federal deficit will further pressure hospital revenues, and we also expect lower rate increases from commercial payors as they face their own increased regulatory requirements under reform,” Wexler added. “We also expect weaker revenue and volume trends to continue in FY 2011 and FY 2012, leading to a further downturn in the reported median data next year.”
On the upside however, Moody’s reported that total cash and investments gained improvement due to stock market gains. Additionally, the better control of operating spending improved 2010 operating measures and debt coverage ratios.
The report is entitled, “U.S. Not-For-Profit Hospital Medians Show Resiliency Against Industry Headwinds But Challenges Still Support Negative Outlook.”