Moody's: For-profit hospital growth continues — 5 things to know

Moody's Investors Service has reported a stable outlook for the for-profit hospital sector, bolstered by positive patient volume growth and expansion of Medicaid.

Here are five highlights from the Moody's report.

1. Growth rates through 2016 will return to normal levels, down from the rapid growth from the initial expansion of insurance coverage in 2014. Initially, utilization of healthcare services grew quickly due to the newly insured, but the rate of growth will slow as the number of newly insured people stabilizes and the pool of uninsured individuals seeking coverage shrinks, according to Moody's.

2. Volume growth will continue to be positive, with outpatient growth surpassing inpatient growth. Moody's projects outpatient growth will continue as hospital operators invest in additional points of access, such as primary care offices, urgent care centers, freestanding emergency departments, ambulatory surgery centers and imaging centers. Inpatient volumes will likely continue to grow modestly through 2016 as a result of an expanding referral base amid more outpatient services, as well as the likelihood of increased clarity on the proposed Medicare billing and coding rules for short-stay patients, reducing the number of denied claims. 

3. The pace of change in healthcare reimbursement and delivery will accelerate amid merger and government streamlining. Proposed insurance mergers would likely shift power to the payer and away from hospitals in price negotiations, which will likely cause hospital operators (other than the leading providers in their markets) to consolidate or exit those markets. Meanwhile, HHS and CMS intend to move 50 percent of Medicare payments to alternative payment models, such as accountable care organizations and bundled payments, and to tie 90 percent of Medicare payments to quality and value by 2018. 

4. Decreasing bad-debt expenses will continue to benefit hospitals' operating costs. The number of people who lack health insurance will continue to decrease as insurance coverage expands under the ACA. Additionally, the U.S. Supreme Court's decision in June to uphold premiums tax credits for qualified beneficiaries purchasing healthcare on the federal insurance exchange ensured individuals who depend on the subsidies would not lose their insurance. The 31 states including Washington, D.C., that have already expanded Medicaid have seen the most significant reductions in bad debt. Discussions to expand Medicaid programs in other states will continue in 2016.

5. Aggregate same-facility EBITDA growth will continue to moderate through 2016. Overall, Moody's expects aggregate same-facility EBITDA growth of about 3 to 3.5 percent over the next 12 to 18 months as a result of the expansion of insurance coverage under the Affordable Care Act in 2014 and early 2015.

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