business
Outlook grim for hospital revenues, report finds
NEWS IN BRIEF — Posted Aug. 22, 2011
Hospital revenues and credit ratings are facing a dismal future, according to a report issued Aug. 9 by Moody's Investors Service.
"Hospital rating downgrades will likely increase in the short term unless expense reductions and productivity gains compensate for stagnant or weak revenue growth," said Lisa Goldstein, author of "Hospitals Revenues in Critical Condition; Downgrades May Follow" and senior vice president of Moody's public finance group. "While better-managed hospitals can stave off rating downgrades, smaller hospitals are coming under particular stress."
Moody's predicts that downgrades of hospital credit ratings will continue because reimbursement rates from Medicare, Medicaid and private insurers are expected to decrease. Medicare payments are considered particularly important to hospitals, because this federal program provides 43% of gross revenues.
In addition, inpatient admissions will most likely be flat, although lower-paid 24-hour observation stays will grow. Further complicating matters, the implementation of the new disease diagnosis classification system, ICD-10, is expected to disrupt revenues further. Hospitals must convert to this system by Oct. 1, 2013.
Credit ratings are considered important to an institution's financial health because they affect the ability to borrow. The lower the credit rating, the higher the interest rate on bonds issued by the hospital.
Note: This item originally appeared at http://www.ama-assn.org/amednews/2011/08/22/bibf0822.htm.
