Nonprofit hospitals vulnerable to declining rate of insured, S&P says

Meg Bryant

June 19, 2018

Dive Brief:

• Despite a stronger economy, the number of uninsured Americans continues to grow, a new S&P Global Ratings report finds.
• To date, the rise in uninsured has no discernible effect on for-profit hospitals. But over time it could hurt credit ratings for nonprofit hospitals and health systems, which see a larger proportion of uninsured patients, S&P analysts say.
• The uninsured rate was at its lowest — 8.8% — in 2016, according to the U.S. Census Bureau. That number came after the implementation of the Affordable Care Act and expansion of Medicaid in a number of states. A recent Commonwealth Fund survey found the number of uninsured in the U.S. has grown to 15.5%.

Dive Insight:

That uninsured rates are increasing again is not surprising given Republican efforts to repeal the ACA and subsequent efforts to undermine the law.

“While legislative efforts to repeal the ACA seem to have abated, for now, the federal government and some states have taken steps to destabilize the exchange market and reduce Medicaid enrollment, while other states have moved to cement the gains of the ACA,” the S&P report says. “We expect these conflicting trends, and the difficult choices confronting states, to continue for the next few years.”

In particular, S&P warns of a credit negative for nonprofits as patients who started on a care plan with health insurance seek to continue treatment without it. Many hospitals already are struggling as volumes and reimbursement decline and more care shifts to outpatient settings.

“Overall, we anticipate growing self-pay populations and higher levels of bad debt,” the report states. “It is a relatively small and incremental phenomenon for now, with no direct and immediate impact on ratings, but something to be monitored closely as uninsured rates continue to rise, particularly coupled with other operating and financial pressures we see in the sector.”

The report reflects recent concerns of other credit agencies. A recent Moody’s Investor Service report showed 41 credit downgrades in the nonprofit hospital sector last year, compared with 32 in 2016. Among pressures affecting nonprofits rising labor and supply costs and cuts to Medicare and Medicaid payments.

While lawmakers in Congress have developed multiple proposals to expand healthcare coverage, none is expected to gain traction in the current political environment, according to S&P. These include Medicare/Medicaid buy-in, which lets people purchase Medicare and Medicaid on the ACA exchanges, and Medicare for all, whereby the government would provide coverage for all Americans in a single-payer system.

https://www.healthcaredive.com/news/nonprofit-hospitals-uninsured/525986/