Skip to main content
Sister Publication Links
  • ESG: THE NEW IMPERATIVE
Subscribe
  • My Account
  • Login
  • Subscribe
  • News
    • Current News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Transformation
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Digital Health
  • Insights
    • ACA 10 Years After
    • Best Practices
    • Special Reports
    • Innovations
  • Data/Lists
    • Rankings/Lists
    • Interactive Databases
    • Data Points
  • Opinion
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Awards
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Diversity in Healthcare
    • Women in Healthcare
    • - Luminaries
    • - Top 25 Diversity Leaders
    • - Leaders to Watch
    • - Luminaries
    • - Top 25 Women Leaders
    • - Women to Watch
  • Events
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Custom Media Event: ESG Summit
    • Transformation Summit
    • Women Leaders in Healthcare Conference
    • Social Determinants of Health Symposium
    • Leadership Symposium
    • Health Care Hall of Fame Gala
    • Top 25 Women Leaders Gala
    • Best Places to Work Awards Gala
    • Top 25 Diversity Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Supply Chain Revenue Cycle
    • - Hospital at Home
    • - Workplace of the Future
    • - Strategic Marketing
    • - Virtual Health
  • Listen
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • MORE +
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Finance
March 26, 2019 04:19 PM

Fitch: Not-for-profit hospital margins will stabilize in 2019

Tara Bannow
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Like it or not, healthcare providers have had to become a resilient bunch.

    They've come back from all-encompassing changes like the introduction of the prospective payment system in 1983, the Balanced Budget Act in 1997 and 2013's federal budget sequestration. Fast-forward to today's challenges, and providers are once again struggling to regain their footing.

    A new report from Fitch Ratings predicts they will.

    "All things being equal, we're just not going to keep seeing this plunge in operational losses," said Kevin Holloran, a senior director with Fitch and author of the report.

    Fitch projects the operating margins of not-for-profit healthcare providers will start to rebound in 2019, despite today's disruption threats, declining commercial reimbursement and weak inpatient volumes. But don't go thinking the report is rosy. It notes 2017 operating margins among Fitch's not-for-profit healthcare issuers were lower than during the Great Recession, except for issuers in the AA category.

    In recent decades, Fitch analysts found many not-for-profit providers' margin declines were caused by one-time events like ill-fated forays into managed care or expensive information technology purchases. That's one reason Holloran said he believes margins will rebound.

    Fitch's data show that's already starting to happen. Preliminary numbers from fiscal 2018 show overall not-for-profit healthcare margins jumped to 2.2%, from 1.9% in fiscal 2017. The increase was among low-rated issuers, those in the BBB category.

    But that's not the whole story. In some respects, management teams are accepting the fact that they're not in transition anymore.

    "What we're seeing is this is normal," Holloran said. "It's normal now to fight and uncover every last dollar of savings you can and every last revenue generation out there. This isn't episodic fixes. It's a daily grind."

    Providers that recover will have responded accordingly, the report said. They will start to see improvements from their short- and long-term cost-saving initiatives designed to respond to the ongoing transformation in healthcare delivery.

    The winners also will have dedicated significant capital spending to either beating disruptors—trying to "out Amazon Amazon," as the report put it—or forging some level of partnership with them, a "half a loaf is better than none" strategy, according to the report.

    The current buzzword is leakage—as in, hospitals losing patients to other providers—but Holloran said it's going to become steerage, which is a similar but slightly different concept. Steerage refers to nontraditional providers like Haven or Apple steering patients toward their access points, whether they're urgent-care clinics in pharmacies or easy access to primary care.

    "They've generally been very upfront about what they want to do," Holloran said. " 'Hey healthcare delivery system, congrats, you can have all the inpatient beds. We'll take patients at that very front end.' "

    Another huge industry shift providers have to strategize around is the aging of baby boomers. Fitch's report says 10,000 people will turn 65 every day over the next decade, and they'll typically leave commercial plans for Medicare. The 65-and-older population sees about 250 admissions per 1,000 people, which is more than double the average among the total population, according to Fitch.

    Some providers have figured out a "secret sauce" that helps them treat Medicare patients in a cost-effective way, Holloran said. He cited Orlando Health, Advent Health and BayCare Health System, all based in Florida, as examples of systems that are doing that successfully.

    For its part, AdventHealth has been working systematically over the past three years to cut costs with a goal of reaching Medicare break-even, said David Banks, chief strategy officer of the Altamonte Springs, Fla.-based health system. That's more difficult in the system's costly academic medical centers than in its rural community hospitals, which are already close to break-even.

    At the same time, the system is investing heavily in population health, growing Medicare Advantage and participating in programs through the CMS that experiment with new reimbursement models, he said.

    "I don't know that we'll ever get off this treadmill," Banks said.

    AdventHealth is also pouring resources into care navigation—that's the leakage Fitch's report mentions. Once patients are discharged from hospitals, AdventHealth wants to ensure they know where to go next and are able to get there, Banks said.

    "It drives additional financial benefit because patients stay connected to your system," he said.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    GettyImages-654573744.jpg
    Some medical debt is being removed from U.S. credit reports
    stephanie-rhee-Klrz1qOKPAc-unsplash.jpg
    Walgreens earnings slide as number of vaccinations wane
    Sponsored Content
    Daily Finance Newsletter: Sign up to receive daily news and data that has a direct impact on the business and financing of healthcare.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Digital Health
    • Insights
      • ACA 10 Years After
      • Best Practices
      • Special Reports
      • Innovations
    • Data/Lists
      • Rankings/Lists
      • Interactive Databases
      • Data Points
    • Opinion
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Awards
      • Nominate/Eligibility
      • 100 Most Influential People
      • 50 Most Influential Clinical Executives
      • Best Places to Work in Healthcare
      • Excellence in Governance
      • Health Care Hall of Fame
      • Healthcare Marketing Impact Awards
      • Top 25 Emerging Leaders
      • Top 25 Innovators
      • Diversity in Healthcare
        • - Luminaries
        • - Top 25 Diversity Leaders
        • - Leaders to Watch
      • Women in Healthcare
        • - Luminaries
        • - Top 25 Women Leaders
        • - Women to Watch
    • Events
      • Conferences
        • Transformation Summit
        • Women Leaders in Healthcare Conference
        • Social Determinants of Health Symposium
        • Leadership Symposium
      • Galas
        • Health Care Hall of Fame Gala
        • Top 25 Women Leaders Gala
        • Best Places to Work Awards Gala
        • Top 25 Diversity Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Supply Chain Revenue Cycle
        • - Hospital at Home
        • - Workplace of the Future
        • - Strategic Marketing
        • - Virtual Health
      • Webinars
      • Custom Media Event: ESG Summit
    • Listen
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • MORE +
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing