Standard & Poor’s thinks acute care hospitals will grow in 2015, shaking off a tough few years where the for-profit hospitals saw inpatient admissions steadily decline.
The credit rating agency said 2014 showed the beginning of the turnaround for acute-care hospitals, with providers reporting lower uncompensated care and stronger adjusted admission trends.
Much of that can be attributed to expanded insurance coverage under the Affordable Care Act, and to a lesser extent, an improved economy, according to the report.
[Also: Fitch Ratings bullish on for-profit healthcare]
The S&P report tracked 12, for-profit acute care providers during the fourth quarter of 2014 and showed results for six: Hospital Corp. of America, Community Health Systems’ Universal Health, Tenet Healthcare, LifePoint and IASIS Healthcare. Each showed increased admission volume.
The report also found showed a reduction in self-pay revenue and an increase in Medicaid revenues, which also reflect coverage expansion. All operators reported a rise in the proportion of revenues coming from commercial contracts, which likely reflects higher rate increases than other payers, more employer-based coverage, and the effect of having 8.4 million people gaining coverage under the ACA in 2014.
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Uninsured admissions decreased, the report stated, particularly in those states with expanded Medicaid coverage.
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S&P believes the companies will continue to benefit from an improved payer mix, though there will be variability based on market focus, the payer mix and presence in Medicaid expansion states, according to Credit Analyst Shannan Murphy.
But in the long term, several factors will limit revenue growth and margin expansion, the report stated, including persistent downward pressure on reimbursement rates, declining Medicare and Medicaid disproportionate share payments, intensifying competition from narrow networks; and the growth in value-based reimbursement models.
Twitter: @SusanMorseHFN