Projections that show Medicare will be out of money sooner than previously expected “is an unambiguous credit negative” for not-for-profit hospitals, Moody's Investors Service said in a weekly report. Medicare accounts for significant hospital revenue and Medicare hospital reimbursements likely cannot avoid dramatic cuts, according to the report.
Medicare projections 'credit negative': Moody's
“Given the extent of the federal deficit, the rising federal debt, other expensive federal commitments, and the general budget-cutting mood in Washington, it is all but impossible to imagine a scenario in which real (as opposed to nominal) Medicare reimbursements will not be cut dramatically,” according to the report.
Trustees for Medicare and Social Security announced recently the Medicare trust fund would be depleted five years earlier than had been believed one year ago. The Great Recession's drag on tax revenue contributed to the accelerated schedule, which projects the trust fund will be broke in 2024.
Moody's reported the median percentage of gross patient revenue attributable to Medicare was 40% among stand-alone hospitals with the highest credit ratings. Hospitals with the weakest credit ratings among Moody's portfolio rely most heavily on Medicare revenue, with a median percentage of gross patient revenue attributable to Medicare of 47%.
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