Prognosis for Hospitals Isn't Great -- WSJ
April 24 2018 - 3:02AM
Dow Jones News
Moody's report cites rising labor costs, shift to outpatient
sites, more Medicare users
By Melanie Evans
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (April 24, 2018).
One important measure of U.S. hospital profits last year reached
a low not seen in the past decade, as a tight labor market and
other factors pressure hospital finances.
The median hospital operating cash flow margin -- monitored by
Moody's Investors Service as a signal of financial strength -- fell
to 8.1% last year from 9.5% a year earlier, in a preliminary
analysis of 160 nonprofit and public hospitals and hospital systems
with credit ratings from the agency, a Moody's report said.
That is the lowest level in the past decade, Moody's data show.
The prior low point came in 2008, when the median margin reached
9.1%. That year, a deep recession sharply slowed growth in
insurers' spending on hospital care. Job losses stripped households
of private insurance coverage, and states' fiscal distress curbed
Medicaid budgets, according to federal economists and
statisticians.
Now, the metric's decline points to new challenges for U.S.
hospitals as more patients seek medical care in nonhospital
settings, and as enrollment surges in Medicare, which typically
pays hospitals less than commercial insurers do. Those trends are
squeezing hospital revenue, while a tight labor market is driving
expenses higher, Moody's said.
Hospitals are the single largest expense in U.S. health care,
and most are government-owned or nonprofit. For-profit hospitals,
which account for roughly one-fifth of the sector, have experienced
similar pressures as their nonprofit and public rivals.
"We've been waiting for this to happen," Lisa Bielamowicz,
president of consultancy Gist Healthcare, said of hospitals'
narrowing margins.
At the same time, gains to hospitals from the Affordable Care
Act's 2014 health-insurance expansion "have been essentially
realized," Moody's said. Hospitals will likely see more unpaid
bills and uninsured patients after Congress included in December's
tax overhaul a repeal of the ACA's individual insurance mandate,
Moody's said
Hospital finances could face more pressure in the future if a
wave of possible health-care deals, such as early stage talks
between Walmart Inc. and insurer Humana Inc., creates new
competition for hospitals.
Hospitals have responded with deals of their own, and some have
invested heavily to expand into outpatient care.
The market shift toward outpatient care helped drag down last
year's median operating cash flow margin, said Rita Sverdlik, a
Moody's analyst who co-authored the new report.
Meanwhile, a nursing shortage has compounded an uptick in
hospital operating expenses, whose growth has outpaced operating
revenue for the second straight year in 2017, according to
Moody's.
Hospitals in tight labor markets for nurses are offering bonuses
to hire and retain nurses and relying on costly temporary nurse
staffing agencies, said Lisa Goldstein, an analyst for Moody's who
also authored the preliminary analysis.
Demand for nurses will intensify where the population is aging
or booming, such as California, Florida and Texas, Moody's said in
a separate report last month. Also likely to see increasing nursing
shortages are U.S. communities hard-hit by opioid addiction and
diabetes, which will increase demand for nurses, Moody's said.
Write to Melanie Evans at Melanie.Evans@wsj.com
(END) Dow Jones Newswires
April 24, 2018 02:47 ET (06:47 GMT)
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