S&P re­port may de­liver more bad news for hos­pi­tals

Modern Healthcare - - THE WEEK AHEAD - —Beth Kutscher

For the sec­ond year in a row, all three ma­jor credit-rat­ing agen­cies may agree on the fi­nan­cial out­look for not­for-profit hos­pi­tals. And the pic­ture isn’t pretty.

Moody’s In­vestors Ser­vice and Fitch Rat­ings al­ready have placed neg­a­tive out­looks on the not-for-profit hos­pi­tal sec­tor. If Stan­dard & Poor’s fol­lows suit this week, the three agen­cies again will have fore­cast a neg­a­tive out­look for the in­dus­try. S&P’s re­port is ex­pected by Thurs­day.

Fitch, which last year is­sued its first neg­a­tive out­look on the sec­tor since 2009, said fi­nan­cial uncer­tain­ties re­main for hos­pi­tals as the Pa­tient Pro­tec­tion and Af­ford­able Care Act is rolled out. Among those uncer­tain­ties are the on­go­ing le­gal chal­lenges to the law, and the sec­tor’s halt­ing progress in shift­ing to new value-based pay­ment mod­els.

Most of the pres­sure will be on smaller hos­pi­tals and sys­tems, as larger or­ga­ni­za­tions can bet­ter take ad­van­tage of cost-cut­ting strate­gies, Moody’s said. But all providers will need to grap­ple with fall­ing pa­tient vol­ume, a shift in their payer mix and costly in­vest­ments in physi­cian prac­tices and in­for­ma­tion tech­nol­ogy over the next 12 months.

Nev­er­the­less, while the op­er­at­ing en­vi­ron­ment is dis­cour­ag­ing, Fitch said it ex­pects “the vast majority” of health sys­tems to have their in­di­vid­ual rat­ings af­firmed rather than down­graded next year. It an­tic­i­pates that hos­pi­tals will main­tain their cur­rent level of prof­itabil­ity de­spite the pro­lif­er­a­tion of high-de­ductible plans— which could erase some of the gains from hav­ing fewer self-pay pa­tients— and the CMS’ two-mid­night rule, which has led to lower pay­ment rates for short-stay pa­tients.

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