Hospital Profitability Sinks to Lowest Levels Since Financial Crisis

Real estate values have largely recovered. In some markets, home values have surpassed the previous peak reached in 2006, just before the housing bubble burst. At just over 4 percent, the unemployment rate is at the lowest level since January of 2000, far lower than the high of nearly 10 percent reached in 2010. GDP has bounced back and forth between 1.5 and 2.9 percent every year since 2009, when it was -2.8 percent.

Despite all that progress, hospital profitability has dropped to the lowest levels since the 2008 financial crisis, according to new data from Moody’s Investors Service based on an analysis of looked at 160 nonprofit and public hospitals and hospital systems. The drop in hospital profitability in 2017 was also the largest year-over-year decline in the last decade.

One cause of the drop in hospital profitability identified in the report is an aging population with growing debt problems. Another is an acute nurse shortage and the fact that hospitals pay dearly for contract or temporary labor from nursing staff agencies.

Another threat to hospital profitability? Competition.

In a recent blog we took a look at how all the major players in Silicon Valley are dipping their toes into healthcare. There’s more on that front, this time from the retail world. Walmart is in talks to merge with health insurance giant Humana. If it goes through, Walmart and Sam’s Club would likely expand their network of in-store clinics and cater to Medicare patients— becoming a major provider of primary care and a major source of competition for traditional hospitals.

What can hospitals do about it? According to Moody’s, new strategies to generate revenue and cut costs will be essential if hospitals are going to buck the recent trend. MedCom can help.

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