Moody's: How CHS, Tenet and LifePoint are offsetting industry challenges

Moody's Investors Service's outlook on the for-profit hospital sector is stable, as it expects earnings growth to increase over the next 12 to 18 months.  

Although for-profit operators face headwinds, Moody's said several factors will help drive higher earnings growth in the sector, including same-facility net revenue growth and benefits from cost-cutting initiatives.

Moody's also expects company-specific actions to offset industry challenges. For example, Franklin, Tenn.-based Community Health Systems and Brentwood, Tenn.-based Quorum Health have both divested several negative- or low-margin hospitals, which will help stabilize profitability, according to Moody's.

The credit rating agency expects Dallas-based Tenet Healthcare to continue to benefit from a significant restructuring program that is forecasted to lift Tenet's EBITDA margins by more than 150 basis points in 2018. LifePoint is expected to benefit from merger-related synergies over the next 12 to 18 months due to its proposed combination with Brentwood-based RCCH HealthCare Partners.

Moody's expects aggregate same-facility EBITDA to grow 3.5 to 4 percent over the next 12 to 18 months, versus a 2 to 3 percent forecast six months ago.

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