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Hospital Profitability Sinks to Lowest Level Since 2008 Financial Crisis

High labor costs, along with lower reimbursement and growing debt problems, is creating pressure on the nation’s hospitals. They’re more cash-strapped than they’ve been since the 2008 financial crisis, and the outlook isn’t expected to improve over the next year, according to a new report from Moody’s Investors Service.

The report analyzed data from 160 nonprofit and public hospitals and hospital systems and found that median operating cash-flow margins, a key measure of profitability, dropped to 8.1% in 2017 from 9.5% in 2016. Expense growth outpaced revenue growth for the second consecutive year.

Rita Sverdlik, an analyst at Moody’s who co-authored the report, points to the nursing shortage in the U.S. as a driver for increased labor costs. She says hospitals are offering signing bonuses to retain or hire new nurses on top of the usual payroll, benefits, employee pensions and health insurance. And for those facilities that can’t hire the nurses they need, they must rely on contract or temporary labor from nursing staff agencies, which can be very expensive.

While hospital profitability increased under the Affordable Care Act as newly-insured people sought out care, that’s starting to taper off now, Sverdlik says.

In an effort to stimulate revenue growth, many hospitals are launching new ambulatory clinics or urgent care centers. “We’re hearing and seeing hospitals going full press on the ambulatory side,” Sverdlik says.

(Pictured above: Jackson Memorial Hospital in Miami, the largest public hospital in the U.S.)

For questions, comments or concerns, please contact Jennifer Duell Popovec

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