Fitch: US Hospitals See Tapering Benefit of the ACA

NEW YORK--(BUSINESS WIRE)-- Link to Fitch Ratings' Report: Hospitals' Credit Diagnosis (Tapering ACA Benefit Belies Decent Operating Fundamentals)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870242

The for-profit hospital industry is seeing the tailwind to operating results provided by the Affordable Care Act dissipate, Fitch Ratings says. However, organic growth in patient volumes and pricing remained solid for the industry in 2Q15. Going forward, some of the 20 states that have not yet expanded Medicaid eligibility may opt to do so, providing a catalyst for additional ACA-related benefits. Approximately eight million Americans have now acquired health insurance since the start of the ACA-related coverage expansion.

The positive implications of the ACA-related insurance expansion gained momentum starting in the second half of 2014, and the effects on the hospital industry should be durable. However, due to a decreasing pace of coverage expansion, the magnitude of the tailwind to levels of uncompensated care and patient utilization of healthcare services is logically tapering.

Fitch believes the financial incentives and willingness of the federal government to negotiate flexible terms of Medicaid expansion with state governments increase the likelihood that more states will opt to expand eligibility. However, these decisions occur in highly politicized arenas, making the outcome of debates difficult to predict. In Fitch's view, past experience suggests that more states will eventually opt to expand over the long run. After Medicaid was created in 1965, about half of all states established programs within one year, but another four years passed before all but two states had established programs.

The for-profit hospital industry's operating results also continue to show evidence of a delayed reaction to the economic recovery. Although rates of patient volume growth will be sequentially slower in the second half of 2015, the rate is unlikely to revert to the depressed levels of 2011-2013. During 2Q15, very strong rates of growth began to taper, with year-over-year growth in same-hospital admissions and adjusted admissions of 0.8% and 2.8%, respectively. Growth in patient volumes improved fairly dramatically beginning in 2Q14, making 2Q15 the first period with a tougher year-over-year comparison.

An improving macroeconomic backdrop seems to be helping a recovery in patient volumes, indicating that the trend of growing healthcare consumerism might result in the industry exhibiting more economic cyclicality in the future. Growth in the consumer share of healthcare spending through insurance products like high deductible health plans could increase the sensitivity of the hospital industry to the financial health of the consumer.

See Fitch's special report "Hospitals' Credit Diagnosis (Tapering ACA Benefit Belies Decent Operating Fundamentals)," available at www.fitchratings.com, for a summary of the quarterly operating performance and credit metrics of companies in the for-profit hospital sector, including detailed debt and organizational structure charts.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150831005812/en/

Fitch Ratings
Megan Neuburger, CFA
Managing Director
Corporate Finance
+1 212-908-0501
33 Whitehall Street
New York, NY
or
Rob Rowan
Senior Director
Fitch Wire
+1 212-908-9159
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
[email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Lerøy Seafood Group ASA: Primary Insider Transaction
• Treasurer Pappas to Host Ukrainian Independence Day Reception Following Daley Plaza Flag Raising Ceremony
• KE Holdings Inc. Announces Second Quarter 2026 Unaudited Financial Results