Hospitals Face a Baby-Boom Bust

Sensing that heightened risk, Moody's downgraded the outlook for not-for-profit hospitals from stable to negative earlier this week. While most not-for-profit hospitals managed to weather the economic downturn at first, Moody's noted, they have now started to see their performance and liquidity erode. At this point, the firm added, even some of the largest players in the group have suffered notable deterioration.

"Congress may face an even weaker hospital industry by the time they get around to doing anything," Skolnick says. "I think the operating environment is already dangerous and likely to get much worse over the next six months."

As a result, Skolnick feels, Congress will think twice about causing additional pain. If anything, she predicts, lawmakers will feel more inclined to adopt new measures that help hospitals instead. In fact, she adds, they have already hinted at quick action designed to expand government-funded health insurance for children -- and even some parents -- who lack coverage right now.

"Anything that extends coverage to the working community would be positive for hospitals," Skolnick notes. "I'm not sure there is anything on the agenda -- which will likely get done -- that would be negative."

Villwock sees a mixed blessing at best. He also expects Congress to expand healthcare coverage and reduce hospital write-offs for the uninsured. At the same time, however, he feels certain that Congress won't stop there.

"It will be done in concert with payment reductions," Villwock states. "With the bulge in beneficiaries, there is no way for the government to pay for services at prices that provide adequate rates of return.