Fitch: 2014 Does Not Look Good for Nonprofit Hospitals

Joining the opinions of Moody's Investors Service and Standard & Poor's Ratings Services, Fitch Ratings believes nonprofit hospitals and health systems face a negative operating environment in 2014.

According to the annual outlook report from Fitch, there are several industry pressures expected to speed up next year. As the rating agency mentioned in November, maintaining profitability will be the most urgent challenge. Median financial ratios were generally stable in 2012, as well as most of this year, Fitch said. However, Medicare cuts and sequestration, Medicaid funding issues, declining inpatient volumes and the rise of high-deductible health plans are heightening threats to hospital profitability.

"Hospitals continued to produce sound profitability [in 2013], benefitting from continued focus on preserving margins," Fitch analysts said in the report. "Liquidity metrics exhibited improvement as organizations focused on capital preservation and enjoyed favorable investment returns. However, Fitch expects the fiscal 2013 median ratios to begin showing signs of weakening from revenue pressures and lower-than-expected volumes."

Fitch also said an organization's financial performance will be more influenced by how CEOs and CFOs control expenses, find clinical efficiencies and manage staffing costs. This may result in more providers reducing or eliminating less profitable service lines to preserve margins.

Fitch's 2014 outlook for hospitals and health systems echoes that of Moody's and S&P. In November, Moody's issued a negative outlook for the nonprofit hospital sector for the sixth straight year. This week, S&P said the outlook is "decidedly negative" and left little room for optimism.

More Articles on Fitch Ratings Reports:
Fitch: Preserving Profitability No. 1 Challenge for Healthcare Next Year
Fitch: Hospitals in States Not Expanding Medicaid Face Dire Financial Fate
Fitch: Political Bickering Over PPACA Only Hurts Healthcare Industry

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