US For-Profit Hospitals: Repeal of Healthcare Law Would Raise Costs and Squeeze Revenues, Profit Margins

Source: Dean Diaz, Moody’s Investors Service, Special Comment, April 4, 2012
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From the press release:
The nullification of the 2010 healthcare law currently under consideration by the US Supreme Court would be a credit negative for for-profit hospital operators, says Moody’s Investors Service in a new special comment. The court is expected to announce in June its decision on the constitutionality of the reform law, which aimed to increase the number of individuals with healthcare insurance by mandating that all individuals purchase coverage.

“If the law is fully or partially repealed, for-profit hospital operators’ costs of treating patients unable to pay their bills would rise, and would limit operators’ revenue growth and profit margins and constrain cash flow,” said Dean Diaz, a Moody’s Vice President-Senior Credit Officer and author of the report. “Bad debt expense already averages over 10% of revenue of our rated for-profit hospital operators.”

Without the mandate that requires individuals to maintain healthcare coverage or face penalties, the pool of uninsured patients will likely expand, and along with increasing costs of providing healthcare services, put even more pressure on for-profit hospital operators. The biggest impact would be felt by operators of acute care for-profit hospitals, including HCA Inc. (B1 stable), Community Health Systems, Inc. (B1 negative) and Tenet Healthcare Corporation (B2 positive), says Moody’s.

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