A pair of new reports from Moody's Investors Service and Fitch Ratings suggest the overall financial health of the for-profit hospital sector is strong, but that the immediate benefits of the Affordable Care Act are beginning to taper off.
Moody's has issued a stable outlook for the for-profit hospital industry, Michael Sandler writes for Modern Healthcare.
Over the next 12 to 18 months, Moody's estimates that for-profit hospitals' EBITDA will grow by between 3% and 3.5%. Moody's expects hospital operating results to improve as bad debt levels continue to fall—particularly in states that have expanded Medicaid—and as Americans become more aware of their coverage options under the ACA.
However, Moody's expects for-profit hospitals' growth rates to decrease from 2014 and return to normal levels through 2016 as fewer Americans become newly insured and seek health care services they have long-delayed.
Moody's also projects that government policy changes and mergers among health systems and insurers will lead to an acceleration of health care delivery system and reimbursement changes.
Similarly, Fitch notes that the financial benefits of the ACA are beginning to "logically" lessen, given a "decreasing pace of coverage expansion." Fitch estimates that same-hospital admissions and adjusted admissions grew year-over-year by 0.8% and 2.8%, respectively, during the second quarter of 2015, a less robust increase than other recent periods'.
Overall, Fitch says that prices and organic patient volume growth were stable through the second quarter of fiscal year 2015.
Even with the initial wave of ACA-related financial benefits decelerating, Fitch highlights other potential growth opportunities, Tamara Rosin writes for Becker's Hospital Review. For instance, Fitch expects some of the states that have not yet expanded Medicaid to do so over the coming months and says the growing economy will help to increase patient volumes.
At the same time, Fitch warns that increasing patient spending on health care—in part because of more consumers purchasing high-deductible plans—could make the hospital industry more sensitive to consumers' financial health, and make hospital finances more vulnerable to cyclical changes in the economy (Sandler, Modern Healthcare, 8/31; Rosin, Becker's Hospital Review, 8/31; Fitch release, 8/31).
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