Standard & Poor's Ratings Services (S&P) expects ratings for most U.S. not-for-profit health care providers to remain steady in 2013 thanks to "a financial cushion many providers have built in the last few years."
However, the agency in its latest industry report says, "we expect credit quality trends in 2013 to be less favorable compared with 2010-2012." It identifies several revenue pressures for 2013, including:
- Sequestration cuts and other Medicare cuts negotiated later this year;
- Increased Affordable Care Act preparation;
- Soft utilization trends; and
- New incentives and penalties for failing to meet value-based purchasing standards.
Although S&P credits hospital management's "responsiveness and resilience" with maintaining positive credit metrics amid growing revenue pressures, it questions "the ability of providers to sustain these favorable trends" because it believes the industry has reached of the top of this credit cycle.
As operating conditions "deteriorate" in 2013 due to growing pressures, hospitals will focus much of their strategic and operating priorities on the health reform preparations, S&P predicts. Namely, hospitals will continue to transition toward value-based payments. The report highlights the importance of infrastructure and physician integration in these efforts (S&P release, 1/4; S&P report, 1/4).