Friday, October 14, 2011

Analysts: Debt Reduction Talks Stalling Hospital Expansion

Wall Street panelists at the Center for Studying Health System Change's (HSC) recent "Wall Street Comes to Washington" Conference say that expansions and construction of new hospitals aren't happening because of investor fears and over potential cuts that may be made by Congress to reduce the national debt.

"I think right now the biggest hurdle is planning," said Fitch Ratings analyst Jeff Schaub. "There are so many things that are unknown. And the planning cycle at acute care providers is five years, 10 years they’re looking out and there’s a big black hole starting 2013, 2014 and extending through 2017. So capital decisions that need to be made now, organizational decisions, affiliation decisions that really need to be made now are being made with a certain amount of contingency. Very often when I meet with hospitals they’re talking about...five, six, maybe even 20 different alternative views of the future and trying to quantify and make decisions among that entire array of possible outcomes."

Citigroup analyst Gary Taylor said that facilities that should be being built right now are probably not because investors do not know if how or if Congress will cost shift Medicare and Medicaid cuts to publicly-traded hospitals. “Since this debt ceiling debate took over and we’ve made commitments to reduce entitlement spending etcetera, publicly traded hospital stocks are down probably 40 percent on average, [and] nursing home stocks are down 70 and 80 percent on average,” Taylor said according to a report in CQHealthbeat (subscription required). “The collective wisdom of the market right now is that investing in . . . certain types of health care providers is extraordinarily risky because of the policy changes, primary reimbursement cuts, that are going to potentially come out of Congress.”

Source: CQ Healthbeat (subscription required); HSC Conference Transcript

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