As a sector, healthcare has had a good run. According to S&P, “The health care sector has outperformed the broader market over each of the last five years.” That’s the good news.
Yet, despite a stable outlook, and even optimism that healthcare can continue to outperform the broader market in 2016, S&P notes some challenges.
The nonprofit sector’s stability is predicated on a boost from Medicaid expansion and the insurance exchanges under the Affordable Care Act. But, there are negative pressures at nonprofits, including difficulty with poor IT installation, weaker patient volumes and the cost of absorbing physician practices. “The strongest hospitals and health systems are likely to just hold existing margin and reserve levels, while weaker providers will likely continue to see operating margin and cash flow erosion and eventually balance sheet pressure.”