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Moody’s report sees relative stability at for-profit hospitals

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Moody’s Investor Services has released a report for the U.S. for-profit hospital sector showing that higher outpatient volumes are counterbalancing weak inpatient volume trends, small increases in reimbursement rates and rising costs, indicating something like stability.

Here are seven findings from the report, as summarized by Becker’s Hospital Review:

1. Moody’s analysts expect that aggregate same-facility EBITDA will grow 2.5- 3 percent over the next 12 to 18 months.

2. “Same-facility growth in inpatient admissions will average 0 to 1 percent as both commercial and government payers continue to shift volumes to lower-cost outpatient settings. Strong growth in outpatient surgeries will drive even more investment in ambulatory surgery centers.”

3. Increasing costs will squeeze hospital margins. Operators will continue to hire more physicians or acquire physician practices to drive referrals and manage population health. “However, these new salaried employees will add costs to the hospital, and physician group operations are typically not very profitable, leading to increased margin pressure.”

4. Bad debt will increase. “Moody’s analysts expect an uptick in bad debt expense as patients become more responsible for a larger portion of their healthcare costs, such as through high-deductible health plans.”

5. More value-based payment or alternative payment models will emerge. “CMS continues to implement more rigorous payment model changes, such as those that are mandatory as opposed to voluntary.”

6. Consolidation and divestitures will continue to influence capital allocation. “For-profit hospital operators will continue to rationalize their portfolios. They will only invest in operations in markets in which they are strong enough to ensure ongoing referral volumes and negotiate leverage with commercial payers.”

7. Novel investments will expand services. “Hospital operators will continue to look for new ways to invest in growth, including through joint ventures and clinical affiliations, as these arrangements require much lower capital outlays than acquisitions. ”

To read the entire Becker’s article, please hit this link.


“Circularity concerns’ about ASC reimbursements

 

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Modern Healthcare reports that as the crackdown on high hospital pricing continues (including sky-high hospital “facilities fees”), the Office of the Inspector General of the U.S. Department of Health and Human Services “is using a congressionally mandated report to repeat its call for Medicare to pay hospitals the same as it pays ambulatory surgery centers (ASC’s) for low-risk outpatient procedures. ”

The policy change could save ¬†taxpayers and Medicare patients $15 billion over five years, the OIG estimates, but would require legislation letting the Centers for Medicare & ¬†Medicaid Services cut the rates for low-risk surgeries “without having to increase other payment rates to make the policy change budget-neutral as required by law.”
“The CMS also said the idea ‘may raise circularity concerns’ because ASC rates are based on a conversion factor from the outpatient prospective payment system for hospitals. Lowering those outpatient rates, that is, could affect the surgical center rates and create a kind of downward spiral.
Lowering those outpatient rates, that is, could affect the surgical center rates and create a kind of downward spiral.”
The CMS said that the Inspector General’s report didn’t offer clinical criteria “to distinguish which patients could be treated in ASCs rather than hospital outpatient settings.”

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