Moody's maintains stable outlook on nonprofit hospital sector

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Moody's Investors Service has maintained its stable outlook on the nonprofit healthcare and hospital sector. The outlook reflects Moody's expectation that cash flow growth in this sector over the next year will be modest compared to the previous two years.

"Following two years of extraordinary growth associated with expansion under the Affordable Care Act, hospital operating cash flow has moderated to 0-1 percent," said Eva Bogaty, a Moody's vice president-senior analyst.

The stable outlook also reflects the rating agency's expectation that there will be some uncertainty in the near term around the future of the ACA. The recent Republican sweep of the White House and Congress could lead to major health policy changes, as President-elect Donald Trump has called for a "market-based alternative" to the ACA, according to Moody's. If the ACA's Medicaid expansion and insurance exchanges are repealed and not replaced, it would lead to an increase in uninsured volumes, which would be negative for the nonprofit healthcare sector.

Moody's said the stable outlook also incorporates the expectation that growth in outpatient services will temper inpatient volume growth, and nonprofit hospitals' operating margins will be compressed by rising expenses.  

Moody's originally changed the sector's outlook from negative to stable in August 2015.

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