Fitch's 2009 outlook for the U.S. healthcare sector is negative. Fitch believes that the healthcare sector will face a very difficult operating environment in 2009 resulting from weaker demand associated with the global economic recession and a U.S. governmental focus on reducing the consumer burden of healthcare spending. The outlook covers for-profit hospital operators as well as pharmaceutical manufacturers and the medical device sector.
Even though U.S. healthcare demand remains strong due to an aging demographic, Fitch expects that growing economic weakness will cause some consumers to delay or forego spending on prescriptions and procedures due to rising unemployment levels and declining wealth. As a result, volume weakness will likely increase, in part putting pressure on top line growth. It is also likely that a growing uninsured or underinsured population will result in increased bad debt and uncompensated care. Regulatory and legislative pressure on the healthcare industry also will grow as the government increases its focus on controlling healthcare costs.
Within the for-profit hospital sector, Fitch notes some offsetting trends that may limit performance declines. First, providers have adopted new methods to address the uninsured, including increased point-of-service collections, patient screening, and efforts to qualify patients for Medicaid or other assistance programs. Second, operators are experiencing stability in managed care pricing, which should allow some revenue growth in spite of weak volumes. Third, it is likely that the newly elected executive and legislative representation will address state Medicaid shortages and enhance healthcare coverage. Finally, with few exceptions, Fitch notes that the sector does not face any significant debt maturities in the next two years that would necessitate refinancing in the current credit environment.
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