The Republicans’ tax overhaul plan, which is expected to become law soon, has negative credit implications for nonprofit hospitals and health systems, according to Moody’s Investors Service.
Here are three ways the tax bill will hurt nonprofit hospitals and health systems.
1. The tax bill will repeal the ACA’s individual insurance mandate. This will cause the uninsured population to rise and raise uncompensated care costs, which will negatively affect healthcare organizations’ operating margins and cash flow, according to Moody’s.
2. The tax plan’s limits on tax-exempt refundings is negative for all issuers of tax-exempt debt, including nonprofit hospitals and health systems, as these financings have been used to reduce long-term borrowing costs and take advantage of lower interest rates, according to Moody’s.
3. The tax bill will slash the corporate tax rate to 21 percent from 35 percent. This change has negative implications for nonprofit hospitals and health systems, as it “makes tax-exempt bonds a less attractive investment for banks and other financial institutions, which will weaken demand, especially for direct bank loans and private placements,” according to Moody’s.