Political uncertainty doesn't change long-term outlook for healthcare, Fitch says

Fitch Ratings said it maintains a stable outlook and sector rating for healthcare, even as the current political climate generates uncertainty.

The agency initially published its 2017 outlook for the industry last December, shortly after the 2016 presidential election. Since then, the agency said healthcare companies have primarily received rating affirmations, and it believes the medium- to long-term fundamental outlook for healthcare is currently in effect. Fitch analysts added the drivers of healthcare trends have not significantly changed.

"As the industry struggles to meet the cost burden of increasing healthcare demand, the long-term solution will require finding a balance between an individual's access to healthcare and its affordability," Megan Neuburger, managing director of U.S. Corporates at Fitch, said in a news release. "Without any concrete solutions currently on the table, near-term uncertainty may force providers to rethink aspects of their business, but this is unlikely to overhaul the industry's broader dynamics."

Fitch cites a number of issues it believes are current risks to healthcare, including repeal and replacement of the ACA, drug pricing, the shift from fee-for-service to value-based care and healthcare consumerism.

The GOP's ACA replacement plan was pulled from the House floor last month. However, Fitch said HHS could still potentially cut funding for federal cost-sharing subsidies that help individuals purchase insurance coverage.

Additionally, Fitch said federal lawmakers have introduced legislation with the goal of lowering drug prices. "Policy objectives are aimed at addressing both drug manufacturers taking advantage of supply dislocations to increase prices on established products and hefty price tags for new, truly innovative therapies," the agency said.

As far as the shift to value-based care, the agency believes "both political parties are philosophically aligned on the benefits of alternative payment models like the Medicare Comprehensive Joint Replacement bundle, so they are likely to continue in some form, although the role government will explicitly play is still up for debate." And regarding healthcare consumerism, Fitch noted patients' desire for price transparency will continue as they take on more financial responsibility for their care.

 

 

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