Moodys Investors Service said the 2007 median financial measures for not-for-profit hospitals and healthcare systems continue to support a stable rating outlook, but an overall softening in volumes and operating performance and some weaker debt measures indicate the beginning of moderate operating pressures.
As a result, Moodys gives an uncertain outlook for the sector in 2008 and 2009. Significantly, 2006 was the first in the past five years in which the median expense growth rate exceeded the median revenue growth rate, Moodys said. On the plus side, operating margins and liquidity balances remain strong relative to historical levels.
Key highlights of the medians include a median growth rate for inpatient admissions of 0.9% and for outpatient surgeries of 0.6% in 2006 because of increased competition and growing consumerism, Moodys said.
Also, for the first time in many years, the median expense growth rate (7.8%) outpaced the median revenue growth rate (7.6%). The median operating margin declined to 2.3% in 2006 from 2.7% in 2005, although it remains well above historical levels, Moodys said. There was also continued higher capital spending as hospitals invested to remain competitive, renovate aging facilities and relieve capacity constraints, according to Moodys. The 2007 median financial measures are based on fiscal year 2006 audited financial statements and utilization data. -- by Cinda Becker
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