According to the ratings agency, profitability and liquidity remained stable for those hospitals with investment-grade debt, while revenue to debt coverage is at the second-highest level since 2006.
Although the operating environment for hospitals is distinctly improved since the 2008 financial crisis impacted credit, Fitch still believes that long-term challenges for many facilities remain.
"Although investment-grade credits continued to perform well, there are many challenges over the medium term that will pressure financial performance, especially given uncertainties surrounding future reimbursement levels," Fitch Director Michael Burger said Thursday in a statement. "Providers with size and scale are best positioned in the changing landscape as they have the ability to generate increased operating efficiencies and better resource allocation."
Moreover, Fitch believes those hospitals with debt below investment grade are not likely to shore up their finances anytime soon. "Fitch expects the credit gap to continue to widen, as the stronger credits have better ability to invest while the weaker credits remain challenged on many fronts," the ratings agency said.
Size remains the biggest gap between those hospitals with good financials and those on more tenuous footing. Fitch found that hospitals with the highest bond rating had average annual revenue of nearly $2 billion, compared to less than $400 million among those hospitals with a "BBB" rating and $167 million among those with a rating below "BBB," noted Reuters.