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Hospitals that don’t adapt could get squeezed out of the care continuum as insurers grow and direct more care to lower-cost settings, according to an analysis from Moody’s Investors Service.
Both not-for-profit and for-profit hospitals are feeling the pressure of falling inpatient volumes and reimbursement levels from government payers along with rising drug costs and labor expenses, as well as regulatory changes to policies like the 340B drug discount program.
Those downward pressures on margins will continue if insurers’ plans to vertically integrate with providers come to fruition, the ratings agency said. The Medicare Payment Advisory Commission estimated that hospital margins could sink to negative 10% in 2017, a drop from negative 7.1% in 2015.