Moody's: Severe flu season will pressure nonprofit hospital margins

Despite an increase in patient admissions, the severe flu outbreak this season will pressure nonprofit hospital margins, according to a recent report by Moody's Investors Service.

A surge in patient volume is often credit-positive for hospitals since reimbursements are often tied to the number of patients served. However, the surge in flu-related patient volume will pressure hospital margins because reimbursements for flu-related services often fail to cover the cost of treatment.

"Minimizing the length of stay for flu patients is essential to maintaining margins, but the severity of this year's flu will complicate those efforts," the Moody's report reads.

In addition, the heightened patient volume increases other costs, such as overtime payments and other unbudgeted staffing costs, and may also limit facility capacity for more profitable services such as elective surgeries. Many hospitals across the nation are considering canceling elective surgeries, which are a valuable source of revenue, as their facilities grapple with an influx of flu-related cases.

Since flu-related admissions are often unplanned, and in many markets there are shortages of primary care physicians, many flu patients are heading to the emergency department to receive care, which is costly.

"Treating large numbers of patients in the ED creates a bottleneck to efficient flow of patients through the hospital and is often an expensive place to receive care," the report reads.

Moody's also notes flu patients are at a higher risk for complications, which may increase hospital costs.

To read the full report, click here.

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