Hospital profitability sinks to levels not seen since financial crisis

The nation’s hospitals last year found themselves more cash-strapped than at any time since the 2008 financial crisis along with the outlook can be not likely to get any better over the next year, according to completely new preliminary data coming from Moody’s Investors Service.

At not-for-profit along with public hospitals, median operating cash-flow margins, a key measure of profitability, dropped to 8.1 percent in 2017 coming from 9.5 percent in 2016, Moody’s said. Expense growth outpaced revenue growth for the second consecutive year.

High labor costs along with lower reimbursement coming from commercial along with federal payers are among the factors behind the squeeze.

“We’re in a nursing shortage inside the United States. In some markets, which can be more acute than others,” said Rita Sverdlik, an analyst at Moody’s who co-authored the report, which looked at 0 nonprofit along with public hospitals along with hospital systems.

Sverdlik said contract or temporary labor coming from nursing staff agencies can be very expensive for hospitals. She added hospitals across the country are offering signing bonuses to retain or hire completely new nurses on top of the usual payroll, benefits, employee pensions along with health insurance.

Gains for hospitals coming from health care insurance expansion along with exchanges under the Affordable Care Act, also known as Obamacare, “have been essentially realized,” she said, meaning which “people had health insurance, were seeking care along with right now which’s starting to taper off.”

The aging American population along with growing debt problems are also cited by Moody’s as factors pressuring hospital systems.

Meanwhile, a potential merger between Walmart along with Medicare insurance giant Humana represents a completely new threat to hospitals’ bottom lines. Walmart has pharmacies in most of its 5,000 stores along with Sam’s Club brands, along with in-store clinics in Georgia, South Carolina along with Texas. An expanded partnership or merger with Humana catering to Medicare patients could help the retailer become a major provider of primary care.

Moody’s said completely new strategies to stimulate revenue growth “will be integral as hospitals along with health systems exhaust cost reduction efforts.”

Strategies currently being employed by hospitals include starting completely new ambulatory clinics or urgent care centers. “We’re hearing along with seeing hospitals going full press on the ambulatory side,” Sverdlik told CNBC. Emergency centers provide “slower reimbursement nevertheless generally lower cost.”

— CNBC’s Bertha Coombs contributed to which report.

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