Nonprofit hospitals are “focused on risk management as a crucial variable and increasingly important credit strength,” reported Moody’s Investors Service in a new report, "Not-for-Profit and Public Healthcare — US: Risk Management Crucial to Success Amid Changing Healthcare Landscape.”
The “key areas of risk management” include new IT and cybersecurity systems, clinical quality, balance sheet strength and reimbursement.
IT systems make up between 25% and 35% of a hospital’s capital budget and “provide benefits in customer service and patient outcomes as well as potential hazards with cost overruns.”
Moody’s Investors Services said IT systems can improve customer service and patient outcomes, but there are also potential hazards and cost overruns. Hospitals must also guard against cyberattacks, which are becoming a larger concern.
The industry is generally graded poorly in preventing and adequately responding to cyberattacks. Hospitals aren't spending enough of their budget on IT security, although most are starting to dedicate more resources that way.
Moody’s said improving quality of care and the patient experience directly helps a hospital’s financial performance. Some strategies include recruiting and retaining top physician and nursing staff, and investments in clinical technology and IT integration.
"The relationship between quality of care and operating margins is increasingly linked. The perception of poor quality or management can have a lasting negative impact on an organization's brand and patient demand, and adversely affect profitability," said Brad Spielman, vice president at Moody's, in a statement announcing the report.
Moody’s recently announced a softening of the nonprofit hospital market, which it said was because of rising labor and pharmaceutical costs. Uncertainty involving healthcare policy and reimbursement changes are also posing a challenge for the industry.
Nonprofit hospitals aren't exempt from the financial struggles illustrated by several recent quarterly reports, and the situation isn't likely to get better soon, Richard Gundling, senior vice president of healthcare financial practices at the Healthcare Financial Management Assocation, recently told Healthcare Dive. "Expense pressures will push down operating margins. Pharmaceutical costs, employment, pension cost growth and bad debt increases will continue," he said.