business
Revenue sluggish, patient volume dropping at nonprofit hospitals
■ Future years look bleak as well because of continuing high unemployment and expected reimbursement cuts, analysts say.
By Victoria Stagg Elliott — Posted Sept. 19, 2011
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A still-sputtering economy is creating a dismal forecast for nonprofit hospital finances, as patients defer care.
This is the conclusion of an annual report issued Aug. 30 by Moody's Investors Service, which analyzed the financial statements of 401 freestanding hospitals and single-state medical systems, along with 16 multistate health care systems.
About half of all hospitals are nonprofit, and, according to the report, median inpatient admissions declined 0.4% in fiscal year 2010, following no growth for fiscal year 2009. Median total operating revenues went up by 4%. This was a decrease from the approximately 6% growth in 2009 and 7% in 2008.
"These are the most challenging numbers that we can remember," said Beth Wexler, author of the report and vice president/senior credit officer at Moody's. "This is a precipitous decline."
Growth in the use of emergency and outpatient services also slowed. The median number of emergency department visits increased 2.7% in 2009 but only 1.1% in 2010. Outpatient visits went up 3.7% in 2009 but only 1.5% in 2010.
Analysts said the numbers were the result of an unemployment rate that is expected to continue to be stubbornly high. Unemployment was 9.1% in August, and Moody's predicts it will remain higher than 8% through 2012.
The way these hospital services were paid for also shifted, which Moody's said probably had an additional negative impact on hospital finances. Medicaid represented 11.9% of median gross revenues in 2009 and increased to 12.4% in 2010. The median gross revenue from Medicare increased from 42.5% in 2009 to 43% in 2010. Payment rates for both programs have either been reduced or are expected to go down in the immediate future. But Moody's said payments from commercial insurers are expected to decline as well.
"The federal deficit will further pressure hospital revenues, and we also expect lower rate increases from commercial payers as they face their own increased regulatory requirements under reform," Wexler said.
