Despite the crashed economy, non-profit hospitals and health systems have generally improved or stayed stable in their basic financial metrics, but this year is different, says ratings agency Fitch Ratings in a recent report.
After almost five years of consistent improvement or stability in hospital financial metrics, 2009 medians showed declines for most financial indicators, down to figures comparable to those of three or five years ago, though they were generally adequate, Fitch analysts said.
Among the biggest problems hospitals faced were huge losses in their investment portfolios, in some cases as high as 30 to 40 percent. Those losses squeezed profitability, and coverage by EBITDA was pulled down by those losses, as well as by a higher cost of capital. All told, median figures for days cash on hand fell 14 percent, excess margin 50 percent and coverage by EBITDA 24 percent, year over year.
Given these issues, it's not surprising that Fitch maintains a negative outlook for the non-profit hospital sector as a whole. Over the next 12 to 24 months, it's expecting that downgrades will exceed upgrades, though affirmations should be the most common rating action.
To learn more about Fitch's outlook:
- read this Fitch overview (reg. req.)
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