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New Medicare cuts threaten non-profit hospitals - Moody's

A patient waits in the hallway for a room to open up in the emergency room at a hospital in Houston, Texas July 27, 2009. REUTERS/Jessica Ri
A patient waits in the hallway for a room to open up in the emergency room at a hospital in Houston, Texas July 27, 2009. REUTERS/Jessica Ri

WASHINGTON (Reuters) - Not-for-profit U.S. hospitals began confronting another threat to their shaky finances last week with the start of reductions to Medicare that are included in the universal federal spending cuts known as sequestration, Moody's Investors Service said on Monday.

Sequestration called for slicing 2 percent from reimbursements paid by the Medicare health insurance program for the elderly, beginning on April 1. That will likely lower the revenues of hospitals, physicians and other healthcare providers by $11 billion in 2013, the rating agency said in a special report.

"The cuts exacerbate an already challenging operating environment for not-for-profit hospitals as many already face low revenue growth from both governmental and private insurance payers," Moody's added.

Not-for-profit hospitals could be hit again during negotiations by members of Congress over a "grand bargain" to reduce the U.S. debt and deficit.

"Moreover, there is a perennial risk that the so-called ‘doc fix' will not be renewed, which would force reductions to physician reimbursements," Moody's said.

This is the fifth year that Moody's has had a negative outlook for not-for-profit hospitals, which tend to serve large low-income populations.

The federal government has often posed the biggest risk to their balance sheets. Moody's in January noted that the health insurance law known as Obamacare calls for more than $300 billion in reductions to Medicare through 2019.

Still, there are other threats to the sector that do not have to do with federal legislation. Mostly, the 2007-09 recession drove up the numbers of people seeking treatment at not-for-profit hospitals, and those high volumes have yet to subside.

(Reporting by Lisa Lambert; Editing by Leslie Adler)

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