Hospital operating margins continue to face pressure

Dec 17, 2014 | Hospital Budgets

It seems like the end of 2014 will not spell the end of financial challenges for the health care industry. Shrinking federal reimbursements, cost-control efforts, combined with mandatory investment in new technologies, have already slowed many care facilities cash flow to a trickle. 

Unfortunately, Reuters reports that the three major credit ratings agencies found that the healthcare and hospital sector is showing a negative outlook for 2015. The agencies explained that "anticipated downgrades, declining operating cash flows, and on-going uncertainties surrounding the implementation of the Affordable Care Act" contributed to the decision. 

Martin Arrick, services analyst with Standard & Poor's Ratings, explained that with the negative pressures facing the industry, many providers will be unable to adapt and remain profitable. The report from Moody's Investors Service forecast 12 to 18 months of weak performance, with smaller practices to encounter the worst struggles. 

Analysts are concerned, because current cost concerns have led to most facilities previously cutting the "low hanging fruit" from their budgets. This could necessitate investment in offering new services or seeking new profit sectors at a time when reimbursement is shifting away from the traditional fee-for-service model in favor of supporting preventative care. While this may help make care more affordable for patients, it means moving away from the patient services that traditionally provided the most revenue. 

For health care facilities, these challenges mean that it is even more important to perform health insurance claims follow-up and protect against bad debt. The decision to outsource receivables management can help protect cash flow and strengthen patient-provider relationships.