Critical access hospitals losing money, but credit ratings safe over political support, Fitch says
With revenue sliding, margins thinning and cash flow very light, these facilities lack reserves to offset market volatility.
Hospital building (stock photo)
Though critical access hospitals will continue to earn less, Fitch Ratings this week said it does not expect the financial struggles to affect these hospitals' credit ratings due to their near 100 percent reimbursement from Medicare and political support that will stave off any attempt to cut payments.
"Critical access hospitals often enjoy strong bipartisan legislative support that will prevent significant reimbursement changes for the foreseeable future,' said Fitch Director Emily Wadhwani in a statement. "Additionally, though they are prolific across the country, their enhanced Medicare payments comprise a very small piece of the overall Medicare budget, making them a less likely target for cuts."
The Fitch report touted the critical access model as giving rural hospitals a better chance at higher credit ratings, due to the Centers for Medicare and Medicaid Services reimbursment levels for facilities that earn CAH designations.
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Still, the Fitch report said critical access hospitals aren't exactly on solid footing. With revenue sliding, margins thinning and cash flow very light, these facilities really don't have the reserves to offset market volatility.
According to Fitch, the effects of the Affordable Care Act will also continue to add pressure to critical access hospitals.
"Demonstrating meaningful use of health information technology, reimbursement pressure from the two-midnight rule on short inpatient stays and reductions to the Medicare Disproportionate Share Hospital program have been largely negative and challenging for CAHs," Fitch said in the report.
The report also said changes in health insurance pricing will have a big effect on small, rural providers.
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Ultimately, it is the shrinking of rural communities that most affects these hospitals. According to the U.S. Census Bureau, 19.3 percent of the U.S. population lived in rural areas in 2010, down from 26.4 percent in 1970.
"Fitch believes that CAHs serving markets with higher rates of population declines face elevated difficulty to remain financially viable given the high fixed cost associated with inpatient services," the report said.
In response, Fitch said rural facilities should move as many treatments as they can into outpatient services.
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