Moody's: Supreme Court Ruling "Credit Neutral" for Hospitals

A report from Moody's Investors Service determined that the Supreme Court's ruling to uphold most of the Patient Protection and Affordable Care Act is a "credit neutral" for non-profit and for-profit acute-care hospitals.

At for-profit hospital operators such as Nashville, Tenn.-based Hospital Corporation of America, Franklin, Tenn.-based Community Health Systems, Dallas-based Tenet Healthcare, Brentwood, Tenn.-based LifePoint Hospitals and others, Moody's analysts believe the expansion of healthcare coverage to millions of Americans will lessen their exposure to bad debts, "which in turn will improve margins and cash flow."

HCA, CHS, Tenet and LifePoint stand to benefit the most because they are the largest rated acute-care hospital operators by revenue. For-profit hospital operators, in general, will see more positive impacts because of their larger capital structure. "However, the ultimate relative impact on any individual company would depend on a number of factors, including volumes, patient mix, demographic changes and service mix," the report said.

Non-profit hospitals are expected to see similar benefits of the insurance expansion, and other aspects of the law — such as the extension of coverage to dependent children up to 26 years of age, the Medicaid expansion and state health insurance exchanges — are all expected to be positive credit features.

However, non-profit and for-profit hospitals will still face reductions to Medicare reimbursements. The PPACA calls for $150 billion in Medicare payment cuts to hospitals over the next decade, and there will also be cuts of $14 billion to Medicaid disproportionate share payments. This will offset some of the benefit of lower bad debt expenses, according to the report, and it will particularly impact safety-net hospitals that see a disproportionately higher amount of poor patients.

More Articles on Moody's Hospital Reports:

Moody's: The 5 Most Prominent Areas of Focus in High-Performing Hospitals

Moody's: Low Non-Profit Hospital Growth Due to Flat Volumes, Payor Pressures

20 Moody's Hospitals With the Highest Combined Medicare and Medicaid Ratios

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