Nonprofit hospitals begin to see financial improvement

Revenue growth and declining annual expense growth are helping paint a better financial picture for nonprofit hospitals, according to preliminary fiscal year 2014 medians for nonprofit and public hospitals from Moody's Investors Service.

Annual median revenue growth for nonprofit hospitals hit an all-time low in 2013 at 3.9 percent. Moody's preliminary numbers are showing some improvement in that area with annual median revenue growth increasing to 4.7 percent in fiscal 2014. The revenue growth is attributable to a number of factors, including continued consolidation in the nonprofit sector and the initial influence of Medicaid expansion being realized, according to Moody's.

The preliminary medians also show the trend of declining annual expense growth at nonprofit hospitals is continuing. In fiscal 2012, annual expense growth was 5.5 percent, and that number fell to 5 percent in FY 2013. In 2014, annual expense growth fell again to 4.6 percent. The ongoing shift of patient care to lower cost settings contributed to the expense growth slowdown, according to Moody's.

The preliminary medians are based on fiscal 2014 audited financial statements for 48 percent of Moody's-rated portfolio. More hospitals will be included in Moody's final report, which will be issued later this year, and the rating agency expects final medians to show weaker operating performance than the preliminary medians.

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