Fitch exec gives hospitals stable outlook

The capital markets for hospitals have stabilized since the start of the Great Recession, but many providers still are closely scrutinizing their operations to cut costs, according to a senior director for Fitch Ratings.

James LeBuhn, a Fitch senior director, told the audience at the Healthcare Financial Management Association ANI conference last week that the negative rating outlooks of 2009 and 2010 have yielded to stable outlooks in 2011 and 2012, although 2013 remains a question mark.

Median ratios for not-for-profit hospitals dipped significantly during 2009 and 2010. Cash on hand shrunk from 175.9 days in 2007 to 151.3 in 2008, although it has since rebounded to more than 180 days in 2010. However, median operating margins have dropped from 2.8 percent in 2006 to 2.6 percent in 2010, even though they have bounced back from 2.2 percent in 2008.

"The industry has adjusted to a new environment, and we've been stable for the past couple of years," LeBuhn observed.

In the meantime, LebBuhn noted that many healthcare organizations are "really focused on cost control and efficiency initiatives."

One example can be found in Scripps Health, a four-hospital system in San Diego that recently announced that consolidating laboratory services, renegotiating non-medical contracts and other changes have added about $77 million a year to its bottom line.

Hospitals also are taking control of historically low interest rates to refinance their debt, according to the Fitch exec.

LeBuhn said the Patient Protection and Affordable Care Act would not have an immediate effect on ratings for hospitals and healthcare systems.

To learn more:
- read the Scripps Health cost savings announcement

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