Moody's maintains stable outlook on for-profit hospital sector

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Moody's Investors Service has maintained its stable outlook on the U.S. for-profit hospital sector for 2017, as it expects higher reimbursement rates from private payers to drive revenue growth.

Over the next 12 to 18 months, Moody's expects for-profit hospitals to benefit from a 1 to 2 percent rise in patient volumes. The debt rating agency said the increase will be driven by higher demand for healthcare services due to decreasing unemployment and an aging population. However, programs that aim to reduce utilization and cost of care will offset this positive trend, according to Moody's.

The debt rating agency expects higher private payer rates to drive revenue growth at for-profit hospitals. Moody's said this growth will be constrained by cuts to laboratory and outpatient reimbursement and reduced Medicaid disproportionate share hospital payments.

"Positive same-facility revenue growth and flat margins drive our stable outlook for the U.S. for-profit hospital sector," said Moody's Senior Vice President Jessica Gladstone. "Margins will hold steady as company-specific actions offset multiple industry challenges, including higher wage and benefits expense stemming from nursing shortages and increased physician employment."

Many for-profit hospital operators are divesting less-profitable facilities and integrating acquisitions, which will benefit their margins, according to Ms. Gladstone.

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