Outlook is stable for nonprofit hospitals, Fitch says

Fitch Ratings has upgraded the outlook on the U.S. nonprofit hospital sector from negative to stable for 2020, as it expects hospitals and health systems to adapt to industry pressures.

Nonprofit hospitals and health systems are facing several challenges, including high pharmaceutical costs and the cost and implementation risks of shifting toward risk-based reimbursement models. Despite these challenges, most provider organizations are aligning their cost models to revenue pressures, according to Fitch.

"Hospitals' and healthcare systems' ability to respond to operational challenges by cutting costs and improving efficiency has placed these entities on surer footing for the continued headwinds they will face in 2020," Fitch said in a release.

Fitch said nonprofit hospitals should expect to face margin pressure as they transition from volume to value-based reimbursement. They should also expect a more competitive operating environment.

"Non-traditional healthcare entrants will continue to be a disruptive factor over the medium to long term and are likely to change the way individuals interact with the sector," Fitch said. "Technology and large retail companies, with potentially deeper pockets, sophisticated and consumer friendly distribution channels, and data platforms they are able to leverage are expected to make further inroads into pharmacy and low-acuity medical services."

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