August 21, 2008
Fitch: U.S. For-Profit Hospitals’ 2Q08 Performance Not Affected By Weak Economy
The U.S. for-profit hospital industry recorded another strong performance during the second quarter, with minimal impact from the economic slowdown observed in the sector, according to a report by Fitch. In fact, providers reported continued favorable trends in volumes, pricing and bad debt expense. Although volume growth moderated from the first quarter when the flu season was in full effect, the industry still recorded positive admissions growth. Community Health Systems, Inc., Tenet Healthcare Corp., and Universal Health Services, Inc. had particularly strong performances during the quarter.
In addition to favorable volumes, uninsured admissions and bad-debt expense have remained steady across the industry. Although reported bad-debt expense can be affected by accounting conventions, the number of uninsured patients that are admitted to the hospital is a good indicator of the fundamental trends driving bad-debt expense and collections. During the second quarter, every provider except one reported that uninsured admissions either declined or grew more slowly than overall volume increases during the quarter. It appears that the economic environment has not yet resulted in a significant increase in uncompensated care for the for-profit hospital industry. Although bad-debt expense has been steady, Fitch notes that there has been growing pressure on select Medicaid programs. However, overall reimbursement remains favorable in the industry and continues to drive EBITDA growth among providers.
Although the for-profit hospital industry had positive results during the second quarter, Fitch believes the industry could face a more challenging second half of 2008, especially if the economy continues to weaken. The impact of the economy on the for-profit hospital industry is discussed in more detail in the special report, 'Fitch's For-Profit Hospital Industry Quarterly Diagnosis: Second Quarter 2008.' Fitch also discusses key trends in volumes, bad-debt expense and pricing in the report, which is available on the Fitch Ratings web site at www.fitchratings.com.