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Fitch: 2007 Nonprofit Hospitals and Health Care Systems Outlook & Teleconf

Posted on: Wednesday, 10 January 2007, 12:01 CST

Today, Fitch Ratings released its 2007 Nonprofit Hospitals and Health Care Systems Outlook. In conjunction with the report, Fitch will host a teleconference tomorrow, Jan. 11 at 2:00 p.m. ET. Fitch Senior Director and Group Head of the Healthcare-Public Finance team John Wells, along with Fitch Director Anthony Houston, will discuss nonprofit hospitals and health care systems. Director Lauren Coste and Associate Director Anna Haghgooie will speak about for-profit hospital management companies and Director Brad Ellis, from Fitch's Insurance Group, will focus on health insurance/managed care companies. A Q&A session will follow the remarks.

Fitch's 2007 outlook for the nonprofit hospital and health care system sector is stable. Similar to 2006, Fitch expects slight improvement in the operating performance of its rated hospitals and continued improvement in the ratio of downgrades to upgrades in 2007. Revenue growth from managed care and Medicare should adequately offset familiar risks including rising capital needs, inconsistent volume trends, rising expenses, increased competition from physicians and specialty hospitals, and project management and construction costs.

According to Fitch Director Anthony Houston, "hospitals will realize efficiencies and revenue opportunities from best management practices implemented over the past several years. However, a slowing in the rate of revenue growth, external scrutiny on not-for-profit providers, the rising number of uninsured and underinsured, and rising consumerism could result in a reversal in current trends as soon as 2008."

Physician alignment strategies present opportunities for hospitals to solidify their competitive positions. Quality and patient safety initiatives being implemented will more than likely pay dividends over the medium to long term as pay for performance contracts and consumerism gain momentum and as investments in information technology related to quality begin to drive efficiencies and reduce errors. Hospitals have already begun to realize benefits from nonclinical information technology by harnessing data that allows managers to make more timely and informed decisions.

Increased scrutiny of hospitals by federal, state and local legislators and regulatory bodies, such as the Internal Revenue Service, make it paramount for not-for-profit hospitals to increase transparency and disclosure surrounding community benefit. Financial disclosure trends and the increase in quarterly reporting for hospitals whose constituents include investors has improved dramatically; however, continued attention to accountability and internal controls over financial reporting is necessary to maintain investor confidence in the sector.

Volume trends throughout the nation remained inconsistent in 2006 due in part to changing consumer behavior driven by higher out of pocket costs, a weak flu season, and changes in medical technology, especially in cardiology. While volume trends will likely remain volatile over the short term, the aging baby boomer population should contribute to growth in volume in most markets over the long term. Rising co-pays and deductibles, an expected increase in high deductible health plans, and the growing number of self-pay patients could contribute to increases in bad debt expense offset by a push to separate charity care from actual bad debt.

"Despite an improvement in financial median ratios of hospitals in 2006 across all rating categories, rising capital needs will threaten the competitive positions of many hospitals leading to a widening of the financial gap between credits at both ends of the rating scale," said Senior Director John Wells. "However, to a degree this will continue to be offset by measures being taken by the Center for Medicare and Medicaid services (CMS) such as the critical access hospital program, which aims to level the playing field for small community and rural providers," he added.

To participate in the teleconference, interested parties should call 877-241-2557 five minutes prior to the 2 p.m. start time and give the title of the call '2007 Nonprofit and Healthcare Systems Outlook' or the call leader name 'John Wells'. To ensure there are sufficient telephone lines available, use internal conferencing capabilities, if possible, for multiple listeners at a single location. To download a copy of the presentation slides, please go to http://www.fitchratings.com/web_content/presentations/2007/healthcare/ index.cfm. (Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.)

A replay of the teleconference will be available starting Thursday, Jan. 11 at 5:00 p.m. ET until Jan. 18 at 11:59 p.m. ET. To listen to the teleconference replay, participants should call 800- 642-1687. The conference ID number for the replay is '5082564'.

Additionally, the teleconference will be archived on the Fitch Ratings web site. Interested parties can find the appropriate link at the 'Teleconferences and Online Events' link, which is located under the 'Resource Library' at www.fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Source: Business Wire

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