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Moody’s Investors Service Changes 2018 Outlook for Not-for-Profit and Public Health Care to Negative

December 05, 2017

Moody’s Investor Service recently revised its outlook for credit conditions for the not-for-profit and public health care sectors during 2018 from stable to negative.

Moody’s cites that revenue growth is under pressure because of lower payment increases, increased reliance on government payors, and the continued shift of employed groups and individuals to high deductible health plans.

Moody’s also suggests that expenses will outpace revenue growth for not-for-profit and public health care facilities. They also cite the potential of negative pressures from higher labor costs, growing nursing shortages, and rising bad debt.

Highlights from the outlook include:

  • Operating cash flow is projected to contract by 2–4 percent in 2018, as a result of lower revenue growth and increased expenses
  • Revenue growth will slow despite relatively consistent volumes as a result of reimbursement rates not keeping pace with inflation and rising bad debt
  • Expense pressures further impact margins and include the need to address nursing shortages, physician (particularly specialist) supply, and technological investments
  • Federal health policy will have a negative effect on hospitals as a result in changes under the Affordable Care Act (ACA) and federal tax policy
  • Mergers and acquisitions will continue for smaller community and more rural hospitals as they struggle financially

Moody’s states that their outlook could be changed if there are longer-term resolutions to federal policy or regulations that enable cash flow growth in the 0–4 percent range during the next 12–18 months.

HAP’s federal advocacy with Congress is seeking to address these issues through:

  • Assuring that changes to the ACA preserve access to comprehensive coverage and stabilize the health insurance market
  • Funding the Children’s Health Insurance Program
  • Extending the programs that keep hospitals’ doors open, including ensuring stable Medicare funding for rural hospitals, delaying cuts to Medicaid disproportionate share payments, and restoring funding to the 340B drug pricing program
  • Preserving the ability of hospitals to use tax-exempt financing

For more information about HAP’s federal advocacy efforts, contact Laura Stevens Kent, vice president, federal advocacy.

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