Fitch puts 15 nonprofit hospitals on its watch list for ratings downgrade due to coronavirus

Fitch Ratings put 15 nonprofit hospitals and health systems on Rating Watch Negative as the coronavirus pressures their operating margins. (Getty/Ca-ssis)

Fitch Ratings put 15 nonprofit hospitals and health systems on Rating Watch Negative as the coronavirus pressures their operating margins.

The credit rating agency said the Rating Watch reflects those ratings with the greatest risk under the current coronavirus pandemic as reimbursement and overall expenses are expected to be significantly disrupted over the short term.

Impacted hospitals include: 

  • Boone Hospital Center (MO)
  • Care New England (RI)
  • Ector County Hospital District (TX)
  • Erlanger Health System (TN)
  • Holy Redeemer Health System (PA)
  • Jennie Stuart Medical Center (KY)
  • John Fitzgibbon Memorial Hospital (MO)
  • Lifespan Corporation (MD)
  • Marietta Area Health Care Inc., dba Memorial Health System (OH)
  • Pioneers Memorial Healthcare District (CA)
  • Regional West Health Services and Affiliates (NE)
  • South Nassau Communities Hospital (NY)
  • Southeastern Regional Medical Center (NC)
  • Wayne Healthcare (OH)
  • Wise Regional Health System (TX)

RELATED: Moody's, Fitch shift financial outlook to negative for nonprofit hospitals

The action by Fitch impacts $3.7 billion of total outstanding debt. Rating Watches will be resolved and affected credits reviewed within six months as of the publication of this list, officials said.

Health systems around the country have had to stop all elective medical and surgical procedures—key drivers of revenue—which has resulted in weaker operating income in the first half of 2020. Combined with increased cost pressures of treating COVID-19 patients, health systems and medical practices alike have had to sustain workforce cuts. 

Fitch said the disruption of the equities market resulted in double-digit reductions over a very short period of time. The hospitals on the Negative Watch have comparatively light levels of liquidity, or are smaller in terms of net patient revenue, reflecting greater vulnerability to the risks associated with added expenses and reduce elective revenue associated with the coronavirus pandemic.

That increases the concerns given revenue pressures during this time frame should hospitals need to draw on liquidity reserves to meet working capital needs. 

Fitch pointed to future relief from additional government funding. 

Centers for Medicare & Medicaid Services Administrator Seema Verma announced on Tuesday that the agency will give $30 billion in grants to providers this week, which is part of the $100 billion hospital fund pass with the economic stimulus package.

CMS also recently doled out $34 billion in accelerated and advance payments to providers.

But Fitch said the degree of support and the speed with which it is provided may greatly affect the near-term rating impacts of the revenue losses on these credits.

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