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Effects of GOP tax measure on providers

Paige Minemyer writes in FierceHealthcare about how the  House Republican tax  legislation could affect healthcare providers. Among her remarks:

“Perhaps most strikingly, the bill proposes cutting a decades-old tax deduction for people with extremely high medical expenses. The deduction, which was first established in World War II, applies to people whose medical expenses make up 10 percent of their adjusted gross income.”

Tom Nickels, the American Hospital Association’s executive vice president for governmental relations and public policy, has complained that the legislation would halt  hospitals’ access to  financing through tax-exempt bonds and  impose a 20 percent excise tax on the pay of some hospital employees.

“For many communities, tax-exempt financing, such as private activity bonds, has been a key to maintaining vital hospital services. If hospital access to tax-exempt financing is limited or eliminated, hospitals’ ability to make new investments in new technologies and renovations in the future could be challenged.”

Provisions in the bill could benefit for-profit hospitals — e.g., the bill would  slash the corporate tax rate to 20 percent from 35 percent (not including the loopholes that now let many companies pay a much lower rate than 35 percent).

To read her article,  please hit this link.


Fairly smooth sailing seen for for-profit hospitals


Moody’s, the ratings agency, forecasts that for-profit hospitals will do okay over the next 18 months, with earnings growth expected to be in the low single-digits and revenue and pricing continuing to be modestly positive.

“Positive same-facility revenue growth and flat margins drive our stable outlook for the U.S. for-profit hospital sector,” Moody’s senior vice president Jessica Gladstone said. “Aggregate EBITDA will grow 2.5 percent-3.5 percent over the next year or so. Margins will hold steady as company-specific actions offset multiple industry challenges, including higher wage and benefits expense stemming from nursing shortages and increased physician employment.”

Moody’s expects patient volumes to rise 1-2 percent over the next 18 months, with declining unemployment and an aging population among the macro trends that will continue to spur demand for healthcare. “However, structural shifts in payer programs that aim to reduce utilization and the cost of care by shifting patients to lower-cost settings will offset these positive trends,’’ she said.

Igor Belokrinitsky, healthcare strategist at Strategy&, part of PwC, noted to Healthcare Dive that many hospitals are tightening their operations, trying to keep costs frozen in some departments and tinkering with staff and marketing to reduce near-term spending.

“The changes are becoming more dramatic. Fortunately, there’s a bit of a cushion there because what’s been happening over the years is a lot of these hospital systems have consolidated,”  Mr. Belokrinitsky observed. Generally in a hospital merger, the bought property still gets to keep its board, staff, etc. That’s the reserve that’s out there. That’s the value that could be squeezed out of the system if you … really integrated these hospital systems so they function much more as a system as opposed to as a random collection of hospitals.”

To read more, please hit this link.


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