Nonprofit hospital margins will stabilize this year, per new Fitch Ratings report

Despite the many challenges healthcare providers face today—including industry disruptors, reduced commercial reimbursement and declining inpatient volumes—nonprofit hospital margins are expected to rebound and stabilize in 2019, according to a new Fitch Ratings report. Analysts there indicated declines in nonprofit provider margins are often tied to a single event, such as a costly information technology (IT) purchase.

Other findings from the report’s analysis include:

• Operating margins of Fitch’s nonprofit healthcare issuers in 2017 were less than those during the Great Recession, except for issuers in the AA category
• Nonprofit healthcare margins jumped from 1.9 percent in 2017 to 2.2 percent in 2018, primarily among low-rated issuers in the BBB category
• 10,000 people will turn 65 every day during the next 10 years, typically choosing Medicare over commercial plans. The 65-and-older population results in roughly 250 admissions per 1,000 people, or more than double the total population’s average

The report also noted providers should start and continue seeing gains from short- and long-term cost-saving tactics taken in recent years, and that providers should allocate significant capital to either beating industry disruptors, such as Amazon, or partnering with them to innovate and remain competitive.

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