- Moody's Investors Service has retained its negative outlook on not-for-profit hospitals in 2015, predicting that operating margins will continue to weaken.
- The credit rating agency expects median operating cash flow growth to range over a spectrum from negative 0.5% to 1.5%, with smaller hospitals (hospitals with annual revenues of less than $1 billion) to post on the negative end of the scale and larger operations (those with more than $2 billion in annual revenue) to see 3% to 4% growth.
- "The largest hospitals are getting stronger, while the smaller hospitals get weaker," said Moody's VP and senior analyst Daniel Steingart. "The largest hospitals have long generated stronger operating margins and revenue growth owing to factors such as their economies of scale and ability to drive revenue growth through expanded services."
Uneven success of the ACA is the biggest cause for concern here. Hospitals are living with a foot in two worlds, with much of their reimbursement still coming from a fee-for-service model while they try to shift to value-based care. Operating simultaneously under these two contradictory models continues to be a struggle for non-profit organizations. Improved care translates to a decrease in billed services, and the provider starts to lose money. So when savings payouts from programs like the Medicare Shared Savings Program dwindle, hospitals must have a long-range plan to cover overhead and ongoing investment in needed infrastructure. Government ACO programs, like MSSP, are ultimately an opportunity to develop the tools, processes and the team to succeed in a care-based environment, but are a short-term strategy.