Standard & Poor's: Non-profit hospital finances worsened in '08

In news that shouldn't come as a shock to anyone, financial ratings agency Standard & Poor's reported that non-profit hospitals' median operating margins and other key measures of financial health grew worse during fiscal 2008. During that period, the agency downgraded 60 hospitals and health systems and upgraded only 15, compared with 35 downgrades and 18 upgrades in 2007.

Non-profit hospital operating margins fell to 1.8 percent in fiscal 2008, compared with an already-low 2.5 percent in 2007, S&P reported. As if that wasn't bad enough, 70 percent of the 532 hospitals the agency used to make the 2008 estimates had already closed their books before the worst of the economic collapse commenced.

Non-profits' median net margin, which adds in investment and other non-operating income, went down to 3 percent in fiscal '08, from 5.6 percent in fiscal 2007. Median cash reserves fell to 146 days from 167 days for those closing the books on September 30, 2008; those with fiscal years ending Dec. 31 saw net margins fall to 1.2 percent and cash reserves to 134 days.

This isn't shaping up to be a much better year, either. To date, the agency has downgraded 23 hospitals and health systems while upgrading only four. The only obvious economic change in sight for this year would stem from national health reform; if the Obama administration moves as quickly as it hopes to do, maybe that will make a difference in year-end numbers. But I wouldn't hold my breath.

To learn more about the S&P report:
- read this Modern Healthcare article [1] (reg. req.)

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S&P downgrades for non-profit hospitals rise sharply [3]
S&P to monitor non-profit hospital tech spending [4]