Fitch Ratings said the weak economy, high unemployment and strained household spending are expected to drag on demand for healthcare products and services next year. In the rating agency's outlook for 2012, analysts said growth across the for-profit healthcare industry would be “slightly positive” but weak.
Slack economy, unemployment seen as drag on demand for healthcare goods, services
What little growth in patient volume and revenue that for-profit health systems can expect next year will be disproportionately fueled by Medicaid and patients who pay medical bills themselves, Fitch said. Analysts said a greater share of patients without insurance or with safety net coverage can strain profits. However, Community Health Systems, HCA, Health Management Associates, LifePoint Hospitals, Tenet Healthcare Corp. and Universal Health Services, which carry credit ratings from Fitch, are “adequately reserved for bad debt” to prepare for such trends, the report said.
More patients may seek elective procedures in the coming year. “Assuming a continued slow but steady U.S. economic recovery and stable consumer sentiment, Fitch believes more patients who have delayed elective procedures will opt to undergo those procedures in 2012,” analysts wrote.
Medical devicemakers could face pressure from hospitals that are seeking to curb expenses amid continued pressure on revenue, the report said. Hospitals face potential cuts to Medicare reimbursement as part of efforts to curb the U.S. budget deficit, Fitch analysts noted.
Brand name pharmaceuticals manufacturers face the risk of capital allocation decisions that could compromise their credit strength, Fitch said. Expiring patents in 2012 and the following year could put drugmakers at risk for leveraged acquisitions as the sector seeks to replenish its pipeline.
A decision by the U.S. Supreme Court to declare the individual mandate unconstitutional would be a “near-term net negative” for healthcare's outlook, Fitch said.
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