Healthcare finance professionals may have felt like singing along with Billie Holiday this week, seeing “no sun up in the sky” as a series of revised outlooks from Moody’s Investors Service forecast conditions turning from stable to negative across most healthcare sectors. In addition to changed outlooks for for-profit and not-for-profit hospital sectors reported in HFMA News, the outlook was also downgraded for the U.S. medical products and device sector and for health insurers, as reported in The Wall Street Journal’s Health Blog. Stormy weather indeed.
All this news arrived on the heels of last Friday’s report from the American Hospital Association that U.S. community hospitals enjoyed record profits in 2007. Have things really changed so quickly? Not necessarily, suggests an analysis by Ken Terry on David Hamilton’s Health Care Industry blog. Terry notes that, notwithstanding the report of record profits, almost one-third of U.S. hospitals lost money on operations in 2007. And the record profits that some hospitals enjoyed came from returns on investments in the stock market that, needless to say, will not be matched in 2008. Adding to the gloom are reports of softening volumes of paying patients and a rise in uncompensated care.
Is there any sunlight breaking through the clouds? One ray of hope was in Moody’s comments on the outlook downgrade for the for-profit hospital sector. “We continue to believe that the U.S. for-profit hospital sector is less directly impacted by the economic environment than other corporate sectors,” stated Moody’s vice president and senior credit officer Dean Diaz. "Although not immune from a downturn, there's a certain level of necessity to hospital services that helps to sustain demand.”
In other words, things could be worse. But let’s all keep our umbrellas handy.
