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player ready...Consumer choices and tightening reimbursements from insurance companies are having a negative impact on hospital finances, a new report from Moody’s Investors Service indicates.
The New York-based financial agency placed a “negative outlook” on the not-for-profit health-care sector, citing myriad economic forces that are keeping payments low and patients out of the hospital.
In particular, the report said hospitals are suffering from declines in reimbursement from insurers, high expenses and minimal patient volume growth.
Not-for-profit health-care, made up largely of hospitals, dominates the landscape in the Chicago area and the Midwest in general, so the Moody’s report hits home.
The report is based on analysis of 344 of the 570 not-for-profit health-care systems Moody’s rates.
“Hospitals are still feeling a downturn in the overall economy,” said Bruce Gordon, an analyst in Moody’s public finance group.
“During 2003, the median expense growth rate caught up with the median revenue growth rate for the first time in at least three years, which is reflective of the many challenges providers continue to face and underscores the negative outlook,” Moody’s said in its August report.
Hospitals say they are suffering because they are unable to secure large enough rate increases from government and private insurers. States, for example, are still battling budget shortfalls and are therefore unable to provide large increases in payments to hospitals by the Medicaid programs for the poor, which are funded by state and federal money.
Hospitals are also seeing an increase in Medicaid patients thanks to an “economic slowdown,” Moody’s said. In 2003, Medicaid represented a median 9.6 percent of gross patient revenue, up from 9 percent in 2002.
On the commercial reimbursement front, private insurers have been successful at negotiating smaller rate increases from hospitals than in the past. In 2003, hospitals’ commercial insurance reimbursement increases came in the “high single digits,” but are expected to “fall to mid-single digits during 2004,” Moody’s said.
While the financial trend may be bad for hospitals, it could be positive news for employers and others who pay the rising cost of health care. For consumers, the answer is less clear.
“We continue to see greater costs being pushed down to the consumer level, resulting in consumers selecting lower-cost options leading to lower hospitalization levels,” Moody’s said.
Still, hospitals argue that the report is bad news for patients because health-care facilities with financial problems are less likely to invest in infrastructure and new capital improvements.
“When you combine all the financial pressures on hospitals . . . it puts hospitals in a position where it is increasingly difficult to provide the amount of uncompensated care that almost 2 million people in Illinois require because they don’t have health insurance,” said Kenneth Robbins, president of the Illinois Hospital Association.