Moody's revises for-profit hospital outlook to stable, warns of cost-management difficulty

Moody's Investors Service has changed the outlook for U.S. for-profit hospitals from negative to stable. At the same time, the credit rating agency warned that managing costs will be difficult for providers. 

The credit rating agency said that it expects for-profit hospital earnings to grow in the next 12 to 18 months as patient volumes steadily increase and profits continue to benefit from government aid.

Specifically, Moody's expects pre-pandemic patient volume to slowly return throughout the next year, with full recovery by late 2021 or early 2022. 

Moody's also said that hospitals can continue to pad earnings throughout the next few quarters by recognizing payments received from the Provider Relief Fund. Additionally, providers will continue to receive a 20 percent add-on payment for treating Medicare patients with COVID-19 and have a longer timeline to repay accelerated Medicare payments.

Moody's noted some headwinds as a result of the pandemic, including that providers should expect an increase in uninsured or government-insured patients and that managing costs will remain difficult. 

"While hospitals' rapid and aggressive responses to the pandemic helped them limit cash burn and exit the third quarter with much of the liquidity provided through the CARES Act, Moody's believes current cost cuts are not sustainable," the credit rating agency said. 

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