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Reduced Reimbursements Will Lead to Uncertain Financial Outlook for Not-for-Profit Hospitals Beyond 2013

December 17, 2012
by John DeGaspari
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2013 stable despite mounting pressures

Not-for-profit hospitals have a stable financial outlook in 2013, but pressures from expected lower Medicare reimbursements and more limited cost cutting opportunities will result in more financial uncertainty beyond next year, according to a report released last week by Fitch Ratings.

Next year, a focus on operating efficiency, stable reimbursement levels and modest managed care rates will contribute to a stable financial landscape for not-for-profit hospitals and health systems. However, beyond 2013 hospitals will see increased uncertainty as opportunities for additional cost cutting wane and a wave of expected reimbursement reductions will hit the industry under full implementation of the Affordable Care Act beginning in 2014, according to Fitch senior director Jim Lebuhn.

According to the report, the full financial impact of the ACA remains uncertain, as reduced reimbursement from Medicare and Medicaid should be mitigated by expanded coverage of the uninsured through the creation of health insurance exchanges and the expansion of Medicaid eligibility.

If the federal government negotiations fail to avoid the “fiscal cliff,” the hospital industry faces an automatic 2-percent reduction in Medicare reimbursement beginning in January of next year. Fitch believes hospitals should be able to absorb the impact of the reduction since many use conservative assumptions surrounding governmental reimbursement in their budgeting process, but hospitals with lower rated credits will be affected to a greater degree than more financially stable hospitals.



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