Fitch predicts rosier future for for-profit hospitals

Although the overall financial path for hospitals has been a mixed bag, those in the for-profit sector appear to have a particularly bullish future in the near-term.

The financial service Fitch Ratings said that inpatient growth at for-profit hospital companies grew at a 3.5 percent adjusted rate at existing facilities during the third quarter of 2014 (0.7 percent unadjusted). It's the first positive growth in inpatient admissions since the fourth quarter of 2012, according to the ratings service. Fitch studied the financials of six hospital systems, including Community Hospitals, Inc., HCA, Tenet Healthcare and Iasis Healthcare, among others.

Fitch attributed the improvement primarily to the implementation of the Affordable Care Act, which has created an influx of more insured patients. It noted that bad debt expense at for-profit hospital chains dropped by 5.18 percent during the third quarter of 2014. That expense now represents 21.8 percent of revenues.

However, analysts at the rating service were not particularly optimistic about the trend lasting long. They expect growth to continue in the for-profit sector for a couple of more quarters and then taper off.

"Over the longer term, positive organic growth in inpatient admissions is probably not sustainable partly because of pressure by health insurers to reduce volumes of short-stay admissions and rates of hospital readmissions. However, Fitch thinks there is reason for optimism that the improved trend in outpatient volumes has legs since operational initiatives to capture these volumes will have a sustaining influence," the company said in the statement.

Fitch previously expressed a concern regarding the future of hospitals in states that have resisted Medicaid expansion under the ACA, about two dozen altogether. But the ratings agency also believes that resistance to expanding Medicaid will crumble in the coming years and will likely lead to better performance in those states down the line.

To learn more:
- read the Fitch announcement

Related Articles:
Fitch: Hospitals in Medicaid expansion-resistant states feel pinch
Inpatient volumes positive for first time in years
Medicaid spending, enrollment to rise--even in states without expansion
ACA helps some publicly traded hospitals' bottom lines

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