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Moody's: If health reform goes, for-profit hospitals will feel the pinch

by Brendon Nafziger, DOTmed News Associate Editor | April 06, 2012
If the Supreme Court overturns President Obama's health reform law in June, when they're expected to render a verdict on the two-year-old legislation, for-profit hospitals might feel the pinch.

Moody's Investors Service said in a note this week that operators of acute for-profit hospitals like Tenet Healthcare could get squeezed by a growing crowd of uninsured patients unable to pay their bills. Already, bad debt expenses average more than 10 percent of revenue of for-profit hospital groups rated by the agency, Dean Diaz, a Moody's vice president and author of the report, said in a statement.

True, it's not all gloom. Full repeal of the law would provide some benefits for the hospitals, such as getting rid of adjustments called for in the law that slow the growth of Medicare reimbursements. However, these wouldn't offset the "negative effect of the continued rise in uncompensated care costs on for-profit hospital operators’ profit margins," Moody's said.

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In addition to Tenet, the other large, rated, for-profit acute hospital groups include HCA Inc. and Community Health Systems Inc., Moody's said. Specialist hospitals, like Select Medical Holdings Corp. and HealthSouth Corp., wouldn't be as hurt by the repeal of the Affordable Care Act as they don't have emergency rooms and thus see fewer uninsured patients, the financial rating service said.

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