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The Uncertain Outlook for Hospitals in 2017

With the swearing in of a new government administration at the beginning of this year, and much talk of big changes within the healthcare industry by our new president, the next year is bound to be a big one for hospitals all over the country.

This new administration, led by President Trump, has promised to repeal and replace the Affordable Care Act with something that has yet to be clearly defined. There is a strong chance that a replacement will not immediately be put in place once the ACA is changed, which has caused uncertainty throughout the entire healthcare industry.

The uncertain future for healthcare in the United States has prompted a negative outlook for the bottom lines of hospitals.

The Fate of Medicare

President Trump’s appointment of Tom Price to lead the Department of Health and Human Services means that large changes in Medicare and Medicaid are likely in the future.

With Republicans holding both chambers of Congress, Democrats have promised to fight tooth-and-nail to defend these programs. Though it is too early to tell for certain what the direction of Medicare will be, the impact on the healthcare industry will be significant.

Potential reforms such as doing away with Stage 3 Meaningful Use, factoring socio-demographics into hospital readmissions, and protecting DSH payments could all have a significant effect on hospital operations.

Keeping an Eye on Financial Indicators

For a little bit of reassurance, we can look to bond rating agencies for their analyses. One of the largest, Moody’s Investors Service, projected a stable outlook for 2017, despite the potential for change.

Other projections include:

  • Patient volume growth is stable at about 1%
  • Overall expenses due to pharmaceutical and employment costs are on the rise, compressing profit margins
  • Bad debt is on the rise in many areas due to a shrinkage in exchange enrollment rates

Though hospital outlook is uncertain now, as this new administration begins to make clear its plans for healthcare in 2017 and beyond, we will have a clearer picture of what to expect.