Earlier this year, Moody’s Investors Service reported that nonprofit hospitals had posted their second straight year of revenue declines in 2013 and expected that 2014 would be no different. In addition, among 383 hospitals and health systems included in the report, the median hospital revenue growth slowed to an all-time low of 3.9% in 2013.
Low rate increases from commercial payers, continued reimbursement cuts from the federal government, increases in high-deductible health plans contributing bad debt and reduced demand for services, and a shift to lower reimbursement for outpatient services were among the factors listed in the report as continuing to put pressure on revenue growth.
Faring better were some for-profit hospital chains, such as LifePoint Hospitals, which reported a 17% increase in revenue in July 2014 compared with the same quarter in 2013. The company’s quarterly earnings increased by 44% in states that expanded Medicaid coverage.
The higher revenue growth of these larger systems represented their ability to negotiate with insurers, as well as the ability to control costs due to their larger size, according to the report.
The importance of negotiating with insurers and controlling costs is highlighted by what Moody analysts said is “the more fundamental shift taking place in the healthcare system as insurers try to find a way to reward hospitals that provide high-quality care for less money instead of paying them more to deliver more care.”