Fitch still pessimistic about not-for-profits

Fitch Ratings continues to be pessimistic about the prospects for U.S. not-for-profit hospitals, according to the latest guidance from the agency.

With unemployment rising, investment returns still questionable and capital hard to obtain, not-for-profit hospitals are under great stress, Fitch analysts said. State budget problems are expected to lead to more Medicaid reimbursement cuts, and growing unemployment is adding to the ranks of the uninsured. 

Given these stresses, Fitch is predicting that not-for-profit hospital credit ratings will more often drop than rise through July 2010 or January 2011, worsening the not-for-profits' plight.

While Fitch expects hospital reserves to be more or less stable during 2009, the hospitals are still recovering from 2008, when hospital cash-on-hand levels plummeted as investment returns dropped. Meanwhile, reserves for some hospitals may end up being sapped if they're forced to repay variable-rate demand bonds, which could happen if their debt drops below levels required by bond covenants.

To learn more about Fitch's analysis:
- read this Modern Healthcare article (reg. req.)

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