S&P: Outlook for hospital finances bright

Standard & Poor's managing director of non-profit healthcare ratings has a generally positive outlook for healthcare facilities for the next couple of years.

Martin Arrick told a packed ballroom at the Healthcare Financial Management Association's ANI 2011 conference, "We're seeing a lot of good things," and the financial conditions of 2008 and 2009 have stabilized. He added that S&P's upgrades outpaced downgrades by a significant margin in 2011. Many hospitals and systems that received downgrades in recent years have bounced back.

"We see 2011 as finishing the year strongly," Arrick said.

However, Arrick cautioned that not all is rosy. He observed that providers must negotiate a "new normal" of flat patient volumes and growth, which continues to pressure them to cut expenses.

"Managed care payment increases of 5 percent are common now, versus 9 to 12 percent a few years ago," he said. "If you can cut your costs beyond that, it will improve your bottom line."

Meanwhile, Arrick noted that state governments will continue to cut Medicaid and other portions of their budgets that can affect the bottom lines of hospitals.

"The year 2012 will be fine, but my sense is we're in a bit of a waiting game for 2013 and 2014," he said. One variable: how many Americans wind up enrolling in the state-run healthcare exchanges as part of the Patient Protection and Affordable Care Act.

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