The Truth is Powerful
Nonprofit hospitals hit hard by inflation, need “transformational change,” finds Fitch
The COVID-19 pandemic has been hard on nonprofit hospitals, and without action to address upward pressure on their expenses, the hardships are likely to continue, according to a market update from Fitch Ratings.
Expenses are eroding margins, and it’s happening quickly due to the ongoing inflationary pressures of elevated labor, supply and capital costs. Some providers are reporting margins this year that are significantly lower than in 2019, and recovery could take years, Fitch found.
Most have strong balance sheets, which will help to offset the lower margins for a time. But that cushion could evaporate without substantial changes to the business model, or if another coronavirus surge hits during the fall or winter.
Business models will have to go through “transformational changes” to survive long term, and in the short term hospitals will have to manage cost pressures through a combination of rate hikes and relentless, ongoing cost-cutting and productivity improvements.
WHAT’S THE IMPACT
The last time the country experienced this level of cost inflation was during the late 1970s and early 1980s when inflation reached the low teens. At that time, hospital reimbursement was cost-based and cost increases were passed to government and private insurers under a much more elastic […]