S&P: Long-term forecast for hospitals uneven

Despite the economic recovery, Standard & Poor's is not projecting a rosy long-term outlook for the nation's hospitals.

First, the good news: The ratings agency has concluded that net patient revenue was at its highest growth rate since 2008. Credit upgrades for hospitals have also outstripped downgrades in both 2013 and last year by significant margins.

However, Standard & Poor's noted that some indicators of financial performance have begun to weaken. Particularly vulnerable were the median days cash on hand, which was uneven among the more than 500 hospitals it surveyed. Pre-tax margins were also down slightly between 2011 and last year.

"Given the uncertainties of healthcare reform, including the provider investment required to support the newly insured in 2014 and future years, we think most providers will continue to face incremental credit pressures in 2014," the report read. "Furthermore, we believe that the revenue enhancements and cost-cutting of the past several years may be reaching their limit and thus will not be able to keep pace with longer-term reimbursement pressures, especially in light of weaker volumes."

In a report issued earlier this year, Standard & Poor's also cited ongoing pension obligations as another drag on the bottom lines of hospitals and healthcare systems.

Standard & Poor's also believes the transition to a value-based payment system under healthcare reform will also contribute to the weaker margins.

To learn more:
- read the Standard & Poor's report

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