- Effective management has helped nonprofit health systems adjust to the evolving healthcare landscape over two decades defined by disruption, according to S&P Global.
- "We believe the majority of our rated portfolio is well-positioned to compete effectively as new strategies are required" to deal with shifting headwinds, S&P wrote in a report published Monday. Nonprofit providers have seen balance sheet improvements since the early 2000s, indicating improved financial strength and flexibility.
- S&P also expects the majority of nonprofits will remain stable or profitable over the next decade.
The report adds further weight to analyst predictions that nonprofits would likely remain stable, if not profitable, this year — good news for providers facing strong industry headwinds whipped up in part by political and regulatory uncertainty, along with strong competition from tech- and consumer-savvy outsiders. They must also contend with shifting demographics and dwindling volumes that contribute to a shrinking payer mix, oscillating stocks and shrinking margins.
"To be successful, provider management teams must adapt and adjust or run the risk of being left behind," S&P researchers wrote.
According to Moody's, nonprofit and public hospitals spent more than their revenues for the second consecutive year in 2017, leading the ratings agency to conclude they were on an "unsustainable path" going into last year.
But nonprofit systems appear to have turned themselves around, with Fitch Ratings and S&P both determining earlier this year that the worst may be over as not-for-profits continue to report strong balance sheets, improved business profiles and diversifying organizational structure.
Moody's jumped on board the bandwagon late last month, finding nonprofit revenue growth edged ahead of expense growth for the first time since 2015. That was largely driven by consolidation, steadying patient volumes and revenue cycle improvements bolstering revenue and cost-cutting initiatives. Also, drug price increases have slowed, leading to less growth in nonprofit expenses.
Congress has been interested of late in the financial status of America's nonprofits, with Sen. Chuck Grassley, R-Iowa, chairman of the powerful Senate Finance Committee, asking the IRS in February to look into whether nonprofits are fulfilling their charitable obligations to provide community benefits under their tax-exempt status.