While overall hospital industry performance should stabilize this year, bad debt expenses will keep pressuring the sector, according to a report from Fitch Ratings.
Bad debt expenses last year for seven hospital operators examined by Fitch, averaged 10.57% of revenues – up from 10.39% in 2006. Fitch blames the growing uninsured population, declining employer-sponsored health plans and rising co-pays and deductibles. Economic pressures such as housing and unemployment also raise the likelihood that medical bills will go unpaid, according to Fitch.
In general, hospital operators are adequately reserving for bad debt expenses, the report says, and "those with more conservative accounting methodologies actually may have favorable charges to bad debt during 2008."