September 29, 2015

Hospital capital spending is on the rise. Here's why.

Daily Briefing

Not-for-profit health systems are planning to increase capital spending in the coming years, in part because of improved financial outlooks stemming from the Affordable Care Act (ACA), according to a report from Fitch Ratings.

Fitch compared health systems' responses from this year's survey to a similar 2012 survey. Researchers found that 53% of respondents to the 2015 survey planned to increase capital spending over the next five years, up from 45% in 2012.

Fitch Director Adam Kates in a release attributed the expected uptick in capital spending to increased certainty regarding the ACA after the recent Supreme Court decisions, "stable operating profitability during implementation of key [ACA] provisions over the past three years, and increasing patient consumerism."

The Fitch report also found that:

  • 46% of respondents were planning to refinance this year, down from 55% in 2012;
  • 29% planned to issue bonds to fund their capital, down from 39% in 2012; and
  • 17% expected capital expenditures to decrease, down from 19% in 2012.

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In addition, fewer than 33% of respondents this year said they plan to use debt to finance their capital needs (Kutscher, Modern Healthcare, 9/23; Fitch release, 9/24; Japsen, Forbes, 9/27).

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