OREANDA-NEWS. Improving liquidity and leverage metrics are positioning U.S. hospitals for a stable rating outlook next year, though they will have to adapt to a changing reimbursement environment, according to Fitch Ratings in its 2016 outlook report.

Hospitals by and large have built a solid financial cushion to absorb potential operating volatility, thereby allowing for relative stability in overall 2016 rating actions, which Fitch projects will be largely affirmations. Fitch's sector outlook, however, is Negative due largely to the increasing headwinds that will challenge hospitals over time.

'Reimbursement pressures should be relatively benign in 2016, though the sector will over time see a shift of risk from payors like Medicare to providers,' said Director Jennifer Kim. 'Employers will also continue to shift an increasing share of costs onto employees through higher co-pays and deductibles, a development that hospitals are learning to adapt to as well.' Increased penalties under Medicare will also keep reimbursement levels constrained, as well as meaningful cuts on disproportionate share payments and limited commercial rate increases.

Size and scale are also critical factors that will drive strategic decisions and capital deployment for hospitals. 'Providers lacking relevant market penetration and the platform to properly align the continuum of care will increasingly be challenged,' said Kim. 'Conversely, providers with highly specialized expertise like children's hospitals will be somewhat insulated if able to draw from a broader geographic area and/or embed itself in larger organizations.'