Not-for-profit hospital margins fall to 2.2 percent

Rate cuts from Medicare and Medicaid have contributed to poor performance in not-for-profit hospitals.

Moody's Investor Service has released a report that shows expenses continue to outpace revenue growth at not-for-profit hospitals for the second consecutive year. The data show that the providers' expenses increased at an annual rate of 4.6 percent, outpacing their 4.1 percent annual revenue growth. 

Moody's looked at the financial statements of 448 not-for-profit hospitals, about 45 percent of its rated portfolio, and found that due to the rising expenses for healthcare providers, operating margins and cash flow margins have dropped significantly across the industry. 

"The declines in both margins come after several years of growth or stability in profitability," Moody's analyst Jennifer Ewing wrote in the report. Rate cuts from Medicare and Medicaid and the move from commercial payors to governmental payors contributed to not-for-profit hospital's lackluster performance. 

Moody's report anticipates that the slow economic recovery will contribute to flat growth in patient volumes, and that the adoption of new payment models will bring new risk to not-for-profit hospitals. The shift from hospitals' payor system to new government payors also represents an unknown future for accounts receivable management in healthcare. 

The report follows a shift by many hospitals towards increased cost-cutting practices. Many not-for-profit hospital boards are implementing "cost containment strategies," such as a shift to lower-cost outpatient settings. 

Hospitals are also being faced with a rise in bad debt due to the rising popularity of high-deductible health plans. These plans can greatly increase the cost of care for patients, especially in out-of-network care centers. 

At Professional Medical Services, our team can assist your accounts receivable department by offering a wide range of solutions designed to build efficiency and improve all matters pertaining to your billing and follow up process. If your facility has had difficulty with medical claims management, consider outsourcing your medical accounts receivable to Professional Medical Services.