Softer revenues seen continuing at U.S. non-profit hospitals-Moody's

Fri Aug 23, 2013 3:15pm EDT

Aug 23 (Reuters) - Patient and other revenue growth at U.S. not-for-profit hospitals slowed last year, weakening the sector's finances for the first time since fiscal 2008, Moody's Investors Service said on Friday.

"In (fiscal year) 2012, median operating cash flow margin declined to 8.9 percent from 9.2 percent in both FY 2010 and FY 2011," the Wall Street credit ratings agency said in a report.

Operating performance at 402 medical institutions covered in the report was either flat or down, Moody's said. Revenue growth lagged expense growth at the hospitals and health systems for the first time since fiscal 2008.

"The FY 2012 medians highlight the challenges of operating with lower volumes and revenue growth, higher exposure to government payers and increased expenses," Moody's said.

The sector was facing other big changes, such as softness in inpatient services and increased use of outpatient services, Moody's said. Operating performance should stay weak in FY 2013.

"We see no overriding factors that will drive admissions up in FY 2013, a credit factor as most hospitals continue to operate largely in a fee-for-service environment. We expect the transition to a value-based reimbursement system will be highly disruptive for most hospitals and impact performance in FY 2013 and in the coming years," Moody's said.