Children's hospitals reported higher cash flow than adult counterparts last year, Moody's says

Children's hospitals reported stronger financial positions in fiscal year 2017 compared to adult hospitals, according to Moody's Investors Service.

Five takeaways:

1. Children's hospitals reported a higher median operating revenue growth rate than adult hospitals in 2017 (6.4 percent versus 4.6 percent).

2. Moody's said it expects that children's hospitals will continue to report higher median operating revenue growth because they have long-term stability in Children's Health Insurance Program funding. The agency also noted that children's hospitals have more business from privately insured people at a higher profit, along with growing demand for high acuity services.

3. The median expense growth rate for children's hospitals was 7.1 percent in 2017, down from 8.2 percent the year. But data from Moody's shows their median expense growth rate still outpaced operating revenue growth for the third consecutive year.

"Children's hospitals will continue to face greater difficulties controlling costs than adult hospitals due to shortages in pediatric clinicians and staff, as well as higher research and teaching costs," the agency said.

4. While children's hospitals faced expense pressures, they still generated higher operating cash flow margins than adult hospitals in 2017. Data from Moody's shows children's hospitals have consistently generated margins that are 3 to 4 percentage points higher than adult hospitals since at least 2013. The agency said the gap will likelyremain.

5. Children's hospitals consistently report higher liquidity and lower leverage compared to adult hospitals, which Moody's said allows children's hospitals to sufficiently cover capital improvements. In 2017, children's hospitals reported median days cash on hand of 420 versus 210 days for adult hospitals. Children's hospitals also reported lower leverage during that period (2 times median total debt-to-cash flow versus 3.1 times for adults).

Access to the report is available here.

 

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