News in brief - Aug. 22, 2011

Outlook grim for hospital revenues, report finds

Hospital revenues and credit ratings are facing a dismal future, according to a report issued Aug. 9 by Moody's Investors Service.

"Hospital rating downgrades will likely increase in the short term unless expense reductions and productivity gains compensate for stagnant or weak revenue growth," said Lisa Goldstein, author of "Hospitals Revenues in Critical Condition; Downgrades May Follow" and senior vice president of Moody's public finance group. "While better-managed hospitals can stave off rating downgrades, smaller hospitals are coming under particular stress."

Moody's predicts that downgrades of hospital credit ratings will continue because reimbursement rates from Medicare, Medicaid and private insurers are expected to decrease. Medicare payments are considered particularly important to hospitals, because this federal program provides 43% of gross revenues.

In addition, inpatient admissions will most likely be flat, although lower-paid 24-hour observation stays will grow. Further complicating matters, the implementation of the new disease diagnosis classification system, ICD-10, is expected to disrupt revenues further. Hospitals must convert to this system by Oct. 1, 2013.

Credit ratings are considered important to an institution's financial health because they affect the ability to borrow. The lower the credit rating, the higher the interest rate on bonds issued by the hospital.

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Physicians moved to act by meaningful use

Meaningful use incentives continue to drive electronic medical record adoption among physicians, according to a survey by Sage Healthcare Division.

The survey found that 64% of physicians consider meaningful use one of the strongest drivers of health information technology adoption. For those still in the market for an EMR, 32% said insufficient capital was a key challenge moving forward.

Physicians can receive up to a $44,000 bonus over five years from Medicare, or $63,750 over six years from Medicaid, for meaningful use of EMRs.

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United subsidiary buys customer service firm

OptumHealth, UnitedHealth Group's service arm, announced Aug. 3 that it will buy Connextions, an Orlando, Fla., firm that helps insurers build and maintain relationships with customers. The company consults with health plans and handles customer service processes for them. It also helps health plans figure out how to sell to customers in an exchange-style marketplace.

Connextions agents talk directly to health plan members by phone and online to guide them in choosing health benefits, identifying and reaching health goals, and scheduling physician appointments.

The purchase price was undisclosed.

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