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Jessica Gladstone

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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.”

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