Cloudy financial forecasts for hospitals
When one major ratings agency last week released data that found rosier 2009 finances among not-for-profit stand-alone hospitals or single-state systems, analysts did not hesitate to reiterate their concerns for the sector:
“Looking forward, future margins will be pressured by continued low governmental, commercial and managed-care rate increases, rising uncompensated care that will hamper revenue growth, a rise in wage levels to retain personnel, and increased pension expense due to the recently increased number of underfunded defined-benefit plans,” according to Moody's Investors Service.
Hospital executives trying to forecast those future margins say that the changing health policy and marketplace make any projections mostly guesswork. That hasn't stopped them from turning out rough calculations with the aid of financial models released by trade groups, as Modern Healthcare reported this week. For an update on the development of insurance exchanges—one of the health reform law's wildcards for hospital chief financial officers—read an article by my colleague Rebecca Vesely on California's recent exchange legislation.
Meanwhile, underlying the 2009 rebound for operating margins were troubling trends. Revenue and expense growth were more sluggish than the prior year. Efforts to manage expenses—such as frozen wages and job cuts that allowed revenue gains to outpace spending growth for the first time in four years—could be difficult to sustain.
