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Grim outlook for healthcare, hospital sector in 2015: rating agencies
Grim outlook for healthcare, hospital sector in 2015: rating agencies
BY ROBIN RESPAUT Tue Dec 16, 2014
(Reuters) - The outlook for non-profit healthcare remains dour for 2015, as hospital operating margins continue to face pressure from rising costs and weaker reimbursement.
The three major credit ratings agencies gave the healthcare and hospital sector a negative outlook next year, citing anticipated downgrades, declining operating cash flows, and on-going uncertainties surrounding the implementation of the Affordable Care Act.
"The negative pressures facing most providers are widespread," said Martin Arrick, services analyst with Standard & Poor's Ratings. "Many providers will not be able to adapt."
S&P forecasted more downgrades than upgrades among not-for-profit healthcare providers for a third consecutive year, as operating margins are pinched by rising costs. "There would likely have been more downgrades in 2014 if not for the high level of merger and acquisition activity which often precluded downgrades and in many cases led directly to upgrades," S&P said in its 2015 outlook.
Moody's Investors Service anticipated another 12 to 18 months of weak performance, with large hospital systems faring better from economies of scale and the ability to drive revenue growth through expanded services.
"The largest hospitals are getting stronger, while the smaller hospitals get weaker," Moody's senior analyst Daniel Steingart said.
Many hospitals have exhausted the low-hanging fruit for cost-cutting. At the same time, hospitals are expected to shift away from the traditional fee-for-service models, in which more patient services led to more revenue. The Affordable Care Act and purchasers of healthcare are now emphasizing preventative care and reduced hospital stays.
That trend might be good news for the 43 million Americans grappling with overdue medical debt, according to the U.S. Consumer Financial Protection Bureau, but not so for hospitals that historically counted on healthcare spending to balance operating budgets.
Fitch Ratings said more uncertainty is on the way, as Republicans with Congressional control vow to repeal or defund parts of the Affordable Care Act. That would "hamper the sector's ability to adapt and plan," Fitch said.
The rating agency was closely following an upcoming U.S. Supreme Court decision in the King vs. Burwell case, in which the court could effectively invalidate insurance coverage purchased through federally operated state exchanges.
"The hospital sector has navigated many challenging environments in the recent past, but the upcoming years represent a true transition as the core model of healthcare delivery and reimbursement is undergoing redesign," said James LeBuhn, Fitch senior director.
Enrollment in Medicaid Managed Care Grows Faster Than Fee-For-Service
Enrollment in Medicaid Managed Care Grows Faster Than Fee-For-Service
By Rebecca Adams, CQ HealthBeat Associate Editor
The number of Medicaid beneficiaries enrolled through private managed care plans is growing faster than the number of people entering the traditional program, according to an analysis released Wednesday by a trade group representing health plans.
The study, done by the PricewaterhouseCoopers accounting firm for the Medicaid Health Plans of America, found that 9.3 million more Medicaid beneficiaries were in managed care plans in 2014. The number in Medicaid fee-for-service programs fell for the first time, dropping by 300,000 enrollees, according to the report.
The total increase in the number of Medicaid beneficiaries from 2013 to the end of September was about 9 million people, according to the report and federal statistics.
Forty states, up from 37 last year, use private Medicaid plans to deliver services to beneficiaries, according to a presentation on Capitol Hill Wednesday by PwC Health Industries Payer Strategy Director Ari Gottlieb. The jurisdiction with the highest percentage of Medicaid enrollees in managed care is Washington, D.C., followed by New Mexico. The states with the lowest percentage in managed care are Utah, followed by Virginia.
The total number of plans grew from 176 Medicaid plans last year to 184 plans this year, according to Gottlieb. Of those, 166 plans serve just one state. The average number of people in the plans is 134,000 beneficiaries. However, 10 large companies oversee care for more than a million people. The largest Medicaid health plans are UnitedHealthCare, with more than 4.4 million members in 21 states, and Anthem, with 4.3 million members in 17 states. Other companies with a Medicaid population of more than 1 million people include Centene, Molina, WellCare, LA Care, Aetna, HealthNet, Care Source and AmeriHealth Caritas.
“As more states like Tennessee, Indiana, and Utah endorse Medicaid expansion, it only make sense that they do so with the help of Medicaid managed care,” said Jeff Myers, president and CEO of Medicaid Health Plans of America, in a statement. “The risk-based capitated model brings the budget predictability that is key to managing the influx of new Medicaid beneficiaries
Myers had indicated in a talk in early November that 9 million people had joined Medicaid over the past year and that managed care was a growing part of the program. The study provides additional details.
Federal officials are working on a proposed rule that will make changes to policies for Medicaid managed care.
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