A key indicator of the hospital industry’s fiscal health hit a 10-year low last year, according to a news report in The Wall Street Journal.
Moody’s Investor Services offers an assessment of the cash flow margin of hospitals in 2017, finding it dropped to a median of 8.12 percent. That was a sharp decline from 9.5 percent in 2016. It’s the most significant year-to-year decline in the past decade and places hospitals in their weakest financial position since 2008, at the height of the financial crisis sparked by the collapse of the subprime mortgage market.
The Moody’s survey is based on analysis of 160 public and nonprofit hospitals nationwide that receive a credit rating from the organization.
Lisa Bielamowicz, president of the healthcare advisory consultant company Gist Healthcare, told the Journal this dip aligns with recent forecasts of trouble brewing in the hospital industry.
“We’ve been waiting for this to happen,” Bielamowicz said.
Analysts cite the migration of patients from private insurance to Medicare and Medicaid as a major contributor to the profit downtown, noting those federal programs tends to pay less in reimbursing hospitals for procedures and other expenses.
Labor shortages in the ever-growing healthcare field are also identified as a factor, since that imbalance can drive salaries higher.
“We’re in a nursing shortage in the United States,” Moody’s analyst and report contributing author Rita Sverdlik told CNBC. “In some markets, it is more acute than others.”
The number of patients seeking care at hospitals is also dropping, thanks to alternative outpatient care options experiencing rapid growth as companies try to cash in on healthcare, which now accounts for nearly one-fifth of U.S. GDP. That competition is likely to grow more intense as behemoths like Amazon, Walmart, and the merged CVS-Aetna push deeper into the market.
Recognizing the challenges, many hospitals have undertaken efforts to streamline operations and create budget efficiencies. Sverdlik speculates such endeavors have nearly reached the exhaustion point, and administrators will soon turn their attention to expanding services instead.
“We’re hearing and seeing hospitals going full press on the ambulatory side,” Sverdlik noted to CNBC.