Dive Brief:
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Fitch Ratings released a new report this week maintaining a negative sector outlook for U.S. nonprofit hospitals, due to anaylsts' views that challenges will continue from growing consumerism, "meager" rate increases and the transfer of risk from payers to providers through value and risk-based contracting.
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Though the impacts of the ACA have been the slower than anticipated, the risks are not yet diminished, only deferred, the report states.
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The analysts wrote the effects are expected to remain limited beyond 2016.
Dive Insight:
Despite the challenges identified, Fitch expects the sector to maintain historical profitability in 2016, it says, due to stable patient volumes and operating efficiencies. However, reimbursement levels will continue to be constrained, it adds, because of the increased penalties of Medicare's value-based reimbursement program.
The analysts add the ability to leverage size and scale will continue to be critical factors for hospitals, and mergers and acquisitions, and other joint-venture arrangements will continue in 2016. "The benefit of size and scale to reduce per-unit shared service costs, create clinical efficiencies and gain access to larger patient populations will continue to drive consolidation in the acute care space," the report states.
The analsysts also pointed toward the importance of operating agility to keep pace with changes in areas including reimbursement models and patient volumes. "Providers’ ability to adapt operations to the changing environment will be a driver of credit stability," they write.