Academic medical centers boost the bottom line of universities

Teaching hospitals with robust credit help to offset the risks of increased healthcare revenue exposure, according to new research from Moody’s Investors Service.

Academic medical centers are typically larger and more diverse, which gives their universities an advantage over others when it comes to revenue growth, the report notes. Academic medical centers saw 5.5 percent growth in revenue in fiscal 2015, compared to between 3 and 4 percent for the remainder of the university sector.

Moody’s also projects continued patient care revenue growth for academic medical centers, albeit at a slower pace; in fiscal 2015, more than 3 in 4 universities with teaching hospitals saw patient care revenue rise more than 5 percent. However, a marked shift from inpatient to outpatient care within the healthcare industry at large will reduce the pace of growth due to outpatient care’s lower reimbursement rates.

Research revenue, meanwhile, will remain fairly stable, according to Moody’s; teaching hospitals are reaping the benefits of a substantial amount of available funds and robust fundraising, with a median of $5.6 billion in cash and investments last year for private universities and $3.2 billion for public universities. This represents about 30 percent growth for both public and private universities. Academic medical centers remain major drivers of fundraising for their universities, but their continued advantage hinges largely on continued capital investment, according to Moody’s.

There may be trouble ahead, however; as the Centers for Medicare & Medicaid Services speeds the transition to value-based care, its performance measures may eliminate much of the teaching hospital sector’s advantage, FierceHealthcare previously reported.

- here’s the report (.pdf)