Not-for-profit hospitals on the whole will see a slight dip in credit ratings this year before ratings stabilize, according to Standard & Poor's annual outlook (PDF) for the sector.
The rating service blames financial pressures—such as potential cuts to Medicaid and Medicare funding and reduced insurance coverage because of relatively high unemployment—for the projected decline in ratings.
S&P officials lauded hospital administrators for their efforts in controlling costs, and Managing Director Martin Arrick said in a Thursday conference call that the firm believes managers will continue to hold expenses down in the near future. But cutting future costs will pose a challenge, as most of the “easier” cost-cutting tactics have already been used.
“At some point, providers will have a harder time in cutting costs in the traditional way, and we are going to have to look toward changing how they provide care,” Arrick said.