Nonprofit hospital consolidation here to stay, Moody's says

Some unconventional relationships may arise as nonprofit hospitals continue to consolidate in 2019, according to Moody's Investors Service.

Five things to know:

1. Consolidation will be at the forefront of nonprofit hospitals' strategy in 2019. Additionally, as companies like Amazon, Walmart and private equity firms enter the market, many nonprofit hospitals will pursue new business models, according to the ratings agency.

2. Moody's predicts nonprofit hospitals will combine with nontraditional partners like data analytics firms focused on predictive models for patient care and ride-hailing companies to transport patients to appointments.

3. "Not-for-profit hospitals that remain independent will have a tougher job solidifying their indispensability to payers, particularly in competitive, crowded markets," Moody's said. "Rural hospitals with smaller footprints will have less leverage when negotiating rates with managed care companies, and many are already constrained by a weak payer mix."

4. Merger and acquisition activities are likely to face greater scrutiny from state and federal regulators, including approval conditions that could limit revenue-raising strategies and require financial contributions for community benefit.

5. Disruptors such as Amazon, CVS and physician-led ACOs "will challenge hospitals' historical pricing power and profit margins. Hospitals will need to articulate and defend to payers the value proposition of the services they provide. Many will seek to disrupt aspects of their business models to deliver care in a way better aligned with consumer desires for better value, lower costs and an improved experience," according to Moody's.

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