The acute-care hospital industry faces a mixed outlook on Wall Street because of concerns about the effect of new Medicare outlier policy, declining inpatient admissions, general economic worries and increased scrutiny of hospital mergers, the CMS said in its latest report on state of the industry. For-profit chains' stock prices fell, while not-for-profit hospitals saw more negative credit revisions than positive ones so far in 2003. Nevertheless, many hospitals posted solid financial gains in the first quarter of 2003, while in 2002 for-profit hospital companies reported an overall profit margin of 5.7%, up from 5.1% in 2001. Other reports indicate that hospital profit margins are near their historical average. Hospitals able to sustain substantial capital investments continue to expand market share, and acquisition activity has increased, perhaps because of the need for capital, the CMS said. Labor-cost growth, while moderating, and still-steep malpractice premium increases, estimated at 20% in the first quarter, remain a concern, the agency said. CMS market updates are available online at www.cms.gov. -- by Tony Fong
Market outlook mixed for acute-care hospitals: CMS
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