Fitch issues 2016 forecast for non-profit hospitals

When it comes to its 2016 forecast for non-profit hospitals in the U.S. Fitch Ratings does not see many surprises.

The ratings service has maintained its stable ratings outlook for the sector for next year, noting in a report that "we expect the vast majority of rating actions and outlooks in 2016 to be affirmations and stable."

However, Fitch has also maintained its overall negative sector outlook, observing that it "will be increasingly challenged by growing consumerism, meager rate increases and a shifting of risk from payers (particularly Medicare) to providers through the expansion of value-based/risk-based contracting. The slower than anticipated impacts of ACA have not diminished sector risks, only deferred them."

The 2016 outlook is something of a retreat for Fitch, which had issued a seemingly more rosy forecast for non-profit hospitals earlier this year. Indeed, last August, Moody's Investors Service lifted a longtime negative outlook for the sector, bumping it up to stable. It cited improved operating cash flow for many hospitals as among the reasons for its change. Just two years before, it had said that the sector's cash flow had been pinched as a result of increased expenses and more patients finding less expensive alternatives to inpatient care due to personal economic pressures. Moody's had a negative outlook in place for the sector for six consecutive years.

In addition to the bump up by Moody's, Standard & Poor's also revised its long-term outlook for the sector to stable back in September.

"Reimbursement pressures should be relatively benign in 2016, though the sector will over time see a shift of risk from payers like Medicare to providers," said Fitch Director Jennifer Kim in a statement. "Employers will also continue to shift an increasing share of costs onto employees through higher co-pays and deductibles, a development that hospitals are learning to adapt to as well. Increased penalties under Medicare will also keep reimbursement levels constrained, as well as meaningful cuts on disproportionate share payments and limited commercial rate increases."

To learn more:
- read the Fitch statement 
- check out the Fitch report (subscription required)

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