Moody’s revises outlook for not-for-profit/public health care sector

Moody's revises US not-for-profit healthcare outlook to stable from negative as cash flows increase

Moody’s Investors Service, August 26, 2015

Moody's Investors Service has revised the outlook for the US not-for-profit and public healthcare sector to stable from negative due to improvement across the industry's fundamental business, financial and economic conditions. The outlook had been negative since 2008.

Following several years of flat growth, operating cash flow growth increased to 12.3% in 2014 from 0.3% in 2013.

Moody's says factors driving the stronger operating cash flow are increases in the number of insured individuals and a reduction in bad debt, particularly in states which expanded Medicaid eligibility.

The outlook change to stable from negative expresses Moody's views for the sector will neither erode nor significantly improve materially for the 12 to 18 months. Looking beyond that horizon, pressures linger.

"The not-for-profit and public healthcare sector industry faces long-term challenges stemming from who pays for care, how providers are reimbursed, and changes in patient behavior. These risks may weigh on profitability and growth," says (Moody's Vice President -- Senior Analyst Daniel Steingart ).



By Don McCanne, MD

It seems ironic to celebrate profits in the not-for-profit and public health care sector, but at least this Moody’s report does show that the not-for-profit/public sector has moved from negative to stable as cash flows increase. That is reassuring.

Nevertheless this industry still faces long-term challenges, especially based on uncertainties of future funding.

This sector is particularly important since it serves as the primary safety net for those who have impaired access for reasons such as being uninsured. So it is essential that a reliable source of adequate funding is always available.

How can we do that? Simple. Establish a single payer national health program which will fund the entire health care delivery system equitably. Part of that process involves converting the investor-owned, for-profit delivery system to not-for-profit status. Why? The primary mission of non-profits is patient service whereas the primary mission of for-profits is creating wealth by achieving a maximum return on investment. The former works better for patients than does the latter.

Although it is nice that the not-for-profit/public sector has temporarily stabilized, we could be assured of more funds in the future if the administrative waste of our entire system were eliminated. Single payer would ensure stability in our system well into the indefinite future… and beyond.