Expense growth rate exceeded the revenue growth rate again in FY07 as it did in FY06 for its not-for-profit hospitals and health systems, according to a recently released report by Moody’s Investors Service, Not-for-Profit Hospital Medians for Fiscal Year 2007. According to the report, median operating performance and liquidity remain good relative to historical levels, but operations and the rate of liquidity growth are slowing. Slower revenue growth for hospitals is attributed to a continued shift in surgical volumes from inpatient to outpatient settings, increased charity care, and push-back from commercial insurers on higher rate increases. Moody’s says that due to a weak economy and government initiatives such as recovery audit contractor audits, hospitals will continue to see revenue growth restrained in FY08 and FY09.
The report notes a continued increase in capital spending in FY07, attributed to good cash flow generation in recent years, lower cost of capital, the need to remain competitive by renovating aging facilities, and increased IT needs to improve clinical quality and operational efficiency. The medians report is based on analysis of audited financial statements for 410 free-standing hospitals and single-state healthcare systems and 16 multistate healthcare systems, representing 94 percent of Moody’s publicly rated portfolio that is eligible to be included in the medians.
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