Outlook remains negative for US for-profit hospitals, Moody's says

Moody's Investors Service maintained its negative outlook for U.S. for-profit hospitals due to waning federal aid, shifting payer mixes and varying volume trends.

Moody's expects for-profit hospitals earnings before interest tax depreciation and amortization to decline by a low-to-mid single-digit rate in the next 12 to 18 months.

The credit rating agency maintained the negative outlook for several reasons, including that government aid to providers is beginning to wind down and most providers will see adverse payer mix shifts in the next year due to the high unemployment rate in the U.S. 

In addition, volume trends and acuity levels are likely to vary significantly for these for-profit providers across the U.S. and the number of procedures performed outside of the hospital setting will continue to increase, which will weaken hospital earnings, Moody's said. 

Further, the credit rating agency said that many providers implemented rapid and aggressive cost cutting measures, which enabled them to exit the second quarter largely unscathed. 

"Some hospitals have said that for every lost dollar of revenue, they were able to cut about 50 cents in costs. However, we believe that these levels of cost cuts are not sustainable," Moody's said. 

Overall, Moody's said it expects volumes to gradually return to pre-COVID-19 levels in 2021.

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