Nonprofit Healthcare Starting To See Turnaround

Financial agency Fitch Ratings finally has some good news for nonprofit hospitals. According to Kevin Holloran, senior director at Fitch Ratings, hospitals that figure out how to absorb Medicare reimbursements could fare well due to the more frequent and intensive utilization by older patients.

With an estimated 10,000 people set to turn 65 every day during the next decade, “the spread between the profit generating commercial business and break-even to unprofitable government payors will continue to shrink,” he said via a statement. Competition will continue to come from non-traditional facilities.

However, nonprofit systems will be under greater scrutiny. For example, Sen. Chuck Grassley (R-Iowa), chairman of the Senate Finance Committee, has asked the Internal Revenue Service (IRS) to look into whether nonprofit hospitals are fulfilling their charitable obligations. He plans to probe oversight of those hospitals.

There is a requirement in the Affordable Care Act that nonprofits assess the health needs of their communities every three years and offer financial assistance to patients who need help paying medical bills.

According to Fitch Ratings, nonprofit hospitals face the same pressures as for-profit hospitals, with shrinking volumes, smaller federal reimbursements and rising costs. Community nonprofits in states with Medicaid expansion have also seen an increase in Medicaid patients and drop in privately insured, meaning lower payments for care.

Fitch cites the Cleveland Clinic as a nonprofit doing better than its peers. It’s 2018 operating revenues grew 6.2 percent to $8.9 billion, and 2 million patients either in a hospital or outpatient facility. The system also added a hospital, 30 outpatient facilities and more than 100 inpatient beds. Cleveland Clinic CEO Tom Mihaljevic estimated the patient population for the system will double during the next five years.