Moody's reports weaker hospital finances
Not-for-profit hospital medians for FY 2012 show weaker performance, rising expenses
U.S. nonprofit hospitals’ financial performance in fiscal year 2012 wasn’t strong, and the outlook for FY 2013 doesn’t appear to be much better.
At the end of last month, Moody's Investors Service released median financial data for U.S. not-for-profit hospitals that shows a weakening financial performance in fiscal year 2012 following the past three years of stability.
[See also: Moody's confirms negative outlook for U.S. not-for-profit hospitals]
Moody’s analyst Deepa Patel, also an assistant vice president at the firm, said in a press release that in FY 2012, expense growth surpassed revenue growth for the first time since 2008, but, the median total operating revenue growth rate lowered to 5.2 percent in 2012 compared to the improved 2011 rate at 5.4 percent. The median net patient revenue growth rate for not-for-profit hospitals declined to 4.7 percent from 5.3 percent in 2011.
"The FY 2012 medians highlight the challenges of operating with lower volumes and revenue growth, higher exposure to government payers and increased expenses," said Patel, in the press release. "Hospitals are also operating with lower volumes as many markets still report a slow economic recovery and consumers defer care or seek low cost healthcare alternatives.”
[See also: Moody's: Non-profits aren't losing any strength]
The median expense growth rate for these hospitals grew to 5.5 percent in 2012 from 5 percent the previous year, Patel noted.
Many of these hospitals saw higher expenses due to new information technology, physician alignment, supplies and pharmaceuticals, pensions, additional consulting and legal fees tied to mergers and acquisitions, debt restructurings, and performance improvement initiatives. With these higher expense growth rates and lower revenue growth rates, not-for-profit hospitals are facing unsustainable conditions, Patel said.
According to Moody’s, the expected operating performance will likely remain weak for FY 2013, adding to Moody’s negative outlook for the healthcare sector in 2013, as released in an earlier Moody’s report.
[See also: Moody's report shows decline in healthcare utilization due to employee benefits changes]
