Moody's: Preliminary nonprofit healthcare profitability margins at 10-year low

Kelly Gooch - Print  | 

The nonprofit hospital median operating cash flow margin decreased to 8.1 percent in fiscal year 2017, marking the lowest level seen since the 2008-09 recession, according to preliminary financial data from Moody's Investors Service.

The revenue decline comes amid expense growth and pinched revenue growth.

Here are five report insights to know.

1. The nonprofit hospital median operating cash flow margin was 8.1 percent in fiscal year 2017 compared to 9.5 percent the year prior. 

2. The nonprofit hospital annual median revenue growth rate decreased by 2.2 percent in fiscal year 2017 compared to the year prior, while the median expense growth rate fell by 1.7 percent. Pinched revenue growth was attributed to factors such as declining reimbursement from payers, as well as median growth in outpatient visits (2.2 percent) outpacing median growth in inpatient hospitalizations (1.2 percent). Moody's expects nonprofit hospitals' credits to continue to be stressed by the aging population and declining reimbursement.

3. Nonprofit hospital's median absolute unrestricted cash and investments increased by 8.2 percent in fiscal year 2017, partially due to strong market returns, according to Moody's. This compares to 3.8 percent in fiscal year 2016. But the agency reported this growth was offset by median days cash on hand, which only increased 1.5 percent as organizations were pressured by labor, technology and supply costs. Moving forward, Moody's expects limited liquidity improvement as expenses grow and capital spending needs increase.

4. Due to weaker operating performance, nonprofit hospitals generally saw tempered leverage ratios. This is despite the fact median total absolute debt decreased 1.7 percent in fiscal year 2017, according to Moody's. "Operating challenges and increased debt issuance in the fourth quarter of calendar year 2017 will keep debt service coverage measures subdued," the agency wrote.

5. The fiscal year 2017 preliminary financial data from Moody's is in line with the agency's negative outlook on the nonprofit healthcare and hospital sector. The data was based on audited fiscal year 2017 financial statements for 160 nonprofit healthcare organizations, including freestanding hospitals as well as single- and multi-state health systems.

Access the full data here.

 

 

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