Aug 13 (Reuters) - Non-profit healthcare providers face a future of weak finances and growing outside pressures, as a recent spurt of improvements begins to wane, Standard & Poor’s Rating Services said in two reports released on Monday.
Many not-for-profit health systems and stand-alone hospitals have “rebuilt their financial position to pre-2008 levels,” the credit rating agency said.
“And although we view the ability to return to these levels as a positive, especially given the rapid pace of industry change, the economic recession basically limited financial growth in the past five years,” it added.
Many of the requirements in President Barack Obama’s signature healthcare law are coming online, forcing some systems to spend more on information technology. Meanwhile, spending reductions from the budget deal struck by Congress last summer will begin in January under the process known as “sequestration.”
Adding to pressures, inpatient volumes are dropping.
“With pending budget sequestration at the federal level, health reform implementation, and continuing pressure on state budgets, we believe the next several years will be difficult for most providers,” said S&P. “Furthermore, we believe that the improvements of the past several years may be reaching their limit and thus will not be able to keep pace with longer-term revenue pressures, especially in light of weaker volumes.”
S&P says more rating downgrades are possible for not-for-profit healthcare systems over the next two years. It noted that the proportion of systems with positive or stable outlooks is shrinking, which “supports our opinion the multiyear trend of improved financial ratios is unlikely to continue.”
Meanwhile, in its review of about 300 non-profit stand-alone hospitals, S&P found that the spread of rating upgrades to downgrades “has begun to narrow and will continue to shrink for the remainder of the year and 2013.”