Hospital revenue growth continued to slow down in 2010 and is projected to cool further during the next few years, based on early financial results for 2011 and estimates for 2012, said Moody's Investors Service.
Median operating revenue and expense growth last fiscal year dropped to a pace not seen in the last decade, said the rating agency's analysis of 401 not-for-profit hospitals that operate alone or within single-state health systems. Analysts said the weak economy and reduced Medicare and Medicaid payments have strained hospital revenue and will continue to do so, particularly if the nation enters a double-dip recession.
The median hospital operating revenue growth slowed to 4% as the pace of admissions declined -0.4% and demand for emergency and outpatient services was sluggish, Moody's said. Meanwhile, patients who remain at the hospital for observation, for which insurers pay less than a hospital admission, increased 8.3% in 2010, the medians show.
The median hospital expense growth dropped to 4% from 6% the prior year, Moody's said, as hospitals continued to curb spending on salaries, benefits and other expenses. The operating margin median rose to 2.4% in 2010 from 2.3% the prior year.
Hospitals scaled back spending on capital projects and investment gains helped increase cash stockpiles. Moody's measure of hospitals' cash cushion, median unrestricted cash and investments, increased to $201.8 million from $181.3 million the prior year.