NEW YORK, June 2 While Standard & Poor's Equity Research Services expects the passage of healthcare reform to be positive for hospitals after 2014, in the near-term they see margin pressure as rate cuts and givebacks are implemented before the uninsured obtain coverage, thus limiting the industry's ability to reduce bad debt. These and other findings are available in a semi-annual report on the healthcare facilities sub- industry published by Standard & Poor's.
"We anticipate that operating trends at most hospital companies will remain fairly negative in 2010, but could improve modestly if the recession ends during the year," said Jeffrey Englander, Healthcare Facilities Analyst at Standard & Poor's Equity Research. "Increasingly, we see the stocks in the industry being affected by company-specific concerns and expect them to trade more on fundamentals in their individual markets than as an industry. While we see it as a positive that the anxiety over healthcare reform has been lifted, we expect investors to be disappointed near term as industry conditions remain challenging."
Englander adds that as the cost of hospital care continues to outpace the overall inflation rate and the cost of healthcare delivery gains increased attention, containing and reducing costs remain an industry priority. "Although the Medicare pricing outlook currently appears favorable, federal and state budget problems and federal cost-cutting could pressure both Medicare and Medicaid reimbursement in the future," said Englander.
Englander thinks the growing use of information technology by the healthcare facilities sub-industry is a key trend that needs to be watched closely. "For virtually all healthcare companies, information technology has the power to improve the quality, safety, and efficiency of healthcare," observed Englander. "Numerous efforts are underway, both at the national and local levels, to enhance the adoption of technology within the healthcare industry. Several barriers to entry exist, though, including cost, complexity, and the need to significantly alter work processes and culture," said Englander.
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