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By Peter Szostak, CPA, MBA Manager

According to Moody's Investors Service, scheduled Medicare cuts, likely deficit reduction measures, and continued state budget distress and pressure to slow private insurance premium increases will reduce the amount hospitals are paid in the near future.

In the next six years, Medicare is expected to squeeze $243.5 billion from its yearly payment updates and shave another $54.2 billion from payments to hospitals with a disproportionate number of low-income patients. Penalties for patients who return to the hospital within 30 days and with hospital-acquired infections will reduce Medicare hospital spending by another $11.4 billion. Moody's analysts, who maintained a negative outlook for not-for-profit hospitals, called the cuts the sector's "greatest challenge." The potential for more hospital cuts under a deficit reduction deal is the sector's "biggest uncertainty," Moody's said.

Hospitals that diversify with deals for physician groups, nursing homes, insurance companies, or others face heightened financial risks according to the report. Hospitals need to be careful that any current additional revenue generated by these deals is not counted on in the future with all the uncertainty at both the state and federal level.

The full report can be read at



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