December 12, 2017

Moody's says 2018 outlook for for-profit hospitals is stable

Daily Briefing

    Moody's Investors Service projects that for-profit hospitals in the United States will see their earnings before interest, taxes, depreciation, and amortization (EBITDA) grow by 2.5% to 3% in the coming year, according to a report released Thursday.

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    Overall, Moody's said for-profit U.S. hospitals have a stable outlook for 2018, and that if EBITDA grows beyond 4%, the rating could change to positive. Previously, Moody's had said the outlook for non-profit hospitals was negative due to lower reimbursements and rising costs.

    Projection details

    Moody's attributed the projected growth in part to higher negotiated insurer rates—though it said those gains would be offset by a decline in inpatient admissions. Moody's said it expects for-profit hospitals to take measures to rein in cost, including undertaking consolidations.

    Moody's projected that U.S. medical devicemakers will see EBITDA growth ranging from 3% to 3.5%, fueled by an aging population, new products, mergers and acquisitions. However, Moody's said those growth factors will be offset in part by lower inpatient volumes and the industry's transition toward value-based care models, which will "pressure pricing."

    Moody's global projections

    Moody's in the report also said the global health care industry has a stable outlook for 2018, with the global pharmaceutical sector expected to see growth of 1% to 2%. According to Moody's, the growth will be fueled by the oncology market and by the aging population's need for treatments for complex diseases.

    "Global demand for health care products and services will continue to rise in 2018 due to aging populations in mature markets and improving access to health care in emerging ones, as well as new products and technologies," said Michael Levesque, the SVP of Moody's. "But increasing spending on health care will also create budgetary pressures, which in turn will drive cost-containment efforts and other political risks" (Morse, Healthcare Finance News, 12/8; Haefner, Becker's Hospital CFO Report, 12/7).

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