Ratings agency Standard & Poor's maintained its stable outlook for the nation's not-for-profit hospitals, crediting the revenue gains from Medicaid expansion and operating benefits from mergers and acquisitions.
Hospitals that carry a credit rating from the New York-based agency reported “a notable drop in the level of uninsured care, and typically, a commensurate rise in Medicaid revenue,” analysts with Standard & Poor's said in an annual report on the sector.
Meanwhile, the frenzy of dealmaking across the healthcare industry has helped to bolster the stability of balance sheets, the report said.
The ratings agency raised its outlook for the sector to stable from negative last September.
The boost to hospital operations from Medicaid, however, may fade. “We remain cautious about the sustainability of the improved operations as benefits of the improved payer mix have been absorbed, creating a new higher baseline, and additional gains will be more difficult to duplicate in years ahead,” the report said.
Healthcare organizations could face additional pressure as the industry shifts care away from hospitals, using new contracts that pressure providers to hold down spending.
The economy may also create operating pressures as stagnant wages and high deductibles prompt some consumers to avoid care rather than face medical bills.
Many hospitals have enough cash to withstand the recent market volatility, the analysts said. “While we cannot know the length of depth of the current market correction, balance sheets within the sector have, in general, fully recovered from the drops experienced in 2008, and in many cases reached new highs before the current correction,” the report said.