Moody's: It doesn't look like things will get much better for nonprofit hospitals in 2019

hospital
A new report from Moody's Investors Service doesn't project great news for 2019 for nonprofit hospitals. (Getty/urfingussl)

With a report earlier this year showing nonprofit hospitals on an "unsustainable path" as expenses outstripped revenue, this year hasn't been great for nonprofit hospitals. 

Now, a new report from Moody's Investors Service doesn't project great news for 2019, either.

Why? Analysts point to soft revenue growth, weak inpatient volumes and single-digit reimbursement increases in the coming year.

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They did, however, point to some signs of improvement: Expenses are expected to drop in the coming year.

RELATED: Moody's report shows trouble on horizon with 'unsustainable path' for nonprofit hospitals

“The not-for-profit healthcare outlook remains negative amid some glimmers of stability,” Diana Lee, a Moody's vice president, said in a statement. “While expense growth will slow in 2019, we expect it to still exceed revenue growth.”

What is the reason for the negative outlook?

  • Cash flow: The analysts project cash flow will be flat or could drop by up to 1% next year, making control of expenses even more crucial.
     
  • Reimbursement: Moody's projects an 8% to 9% increase in bad debt as health plans place greater financial burdens on patients and an increase in Medicare patients accompanying growth in the aging population to take a toll on revenue growth.
     
  • Volumes: Moody's said it expects revenue growth of 3% to 4% as inpatient admissions remain flat or decline slightly as nonhospital competitors expand.
     
  • Expenses: Hospitals are doing a better job at cutting costs, such as through staffing, as well as by realizing lower increases in drug prices. But it's still expected that expense growth will reach 4% to 5% as hospitals face increasing pressures including nursing shortages, increasing wages from a strong economy, specialty drugs and new technology. 

Nonprofit hospitals have been facing mounting concerns of financial pressures in recent years, with an analysis warning that nearly 10% of hospitals could be at risk of closure and close to 20% of hospitals are not operating in a "healthy" way.

 

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