Lowered reimbursements and potential cuts associated with the recent debt-ceiling deal have led to declining revenue growth for nonprofit hospitals, Moody's Investors Service reports. In fact, the 4 percent median rate of nonprofit hospital revenue growth is the lowest in two decades.
Despite efforts to cut back on costly and unnecessary services, 20 percent of 401 hospitals analyzed were operating in the red for fiscal year 2010. Nonprofits that were in the black weren't much better off, with 63 percent achieving results between break-even and 5 percent.
Low utilization of healthcare services has also added financial challenges to not-for-profit healthcare providers, notes Moody's.
"The lagging economy and persistently stubborn unemployment rate have also discouraged people from seeking care," said Lisa Goldstein, author of a new Moody's report. "This decline is noteworthy because stable-to-growing patient volumes are essential to revenue growth in a sector that still operates in a fee-for-service environment."
Inpatient admissions in 2010 dropped 0.4 percent from the previous year, marking the first time Moody's has seen such a negative admissions rate, according to Goldstein, the Wall Street Journal reports.
To survive, many nonprofits are turning to larger for-profit institutions for financial security. Their weakened revenue growth may have helped push healthcare mergers and acquisitions to break records in the second quarter of 2011.