Sequester Cuts Take Toll on Nonprofit Hospitals

nonprofit hospital
IMG: via

U.S. sequestration cuts have hit, and some organizations are feeling it more than others. Nonprofit hospitals, which are already on fragile financial ground, started out this month dealing with the 2 percent cut from Medicare reimbursements, which will likely lower their already modest revenues.

Nonprofit hospitals differ from government owned public hospitals and privately owned for-profit hospitals. They function as a nonprofit corporation would, have tax-exempt status, are often affiliated with a religious denomination, and account for the majority of hospitals in the United States. Medicare is the national health insurance program for the elderly, and its modest-sounding 2 percent cuts will likely lower revenues by a total of $11 billion in 2013 alone.

“The cuts exacerbate an already challenging operating environment for not-for-profit hospitals as many already face low revenue growth from both governmental and private insurance payers,” read a report from Moody’s, whose CEO is Raymond McDaniel.

“Moreover, there is a perennial risk that the so-called ‘doc fix’ will not be renewed, which would force reductions to physician reimbursements,” added Moody’s.

And since the recession in 2007, nonprofit hospitals have seen increased numbers of people seeking treatment there as opposed to traditional hospitals. That’s no surprise, since nonprofit hospitals generally serve large groups of low-income populations—and the recession bolstered that number.

Moody’s has given nonprofit hospitals a negative outlook for the fifth year in a row. Some worry that the U.S. Congress’s eventual negotiations to reduce the country’s debt and national deficit will further endanger nonprofit hospital.