Moody's: Nonprofit hospitals face volume, margin declines as insurers acquire physicians

As commercial payers swallow up more physician groups and nonacute care services, nonprofit hospitals will see greater pressure on their volumes and margins, according to Moody's Investors Service.

Moody's analysts predict insurers will be able to provide preventive, outpatient and post-acute care to their members through acquired providers at a lower cost than hospitals. As a result, insurers will begin carving out hospitals and select services from their contracts, leaving nonprofit hospitals with fewer patients and less revenue.

CVS Health's $69 billion bid for Aetna and Optum's takeover of Surgical Care Affiliates are examples of integrations that could threaten nonprofit hospitals' bottom lines, Moody's said.

On another front, nonprofit hospitals face increasing pressure from insurers moving quickly to value-based payment programs. Payers will also leverage their growing scale, driven by Medicare and managed Medicaid expansions, in rate negotiations.

"Insurers flexing their negotiating power by offering lower rate increases will likely result in more standoffs and terminations of contracts between insurers and hospitals," according to Diana Lee, a Moody's vice president. "To regain leverage, we expect hospitals to continue [merger and acquisition] and consolidation."

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