Standard & Poor's says non-profit systems' finances should keep eroding

The next few months shouldn't be much better for non-profit hospital systems than the first half of 2009 was, according to a new report from financial ratings firm Standard & Poor's. S&P says that with the recession continuing to grind away at balance sheets and credit market troubles limiting access to cash, systems are continuing to struggle.

The agency reports that median operating margins fell or remain flat for the 134 systems it rates, regardless of their credit rating. Overall, the median operating margin for the group was 2.4 percent, compared with 2.8 percent the prior year.

Net margins, which take into account plunging investment income, fell from 6.3 percent in 2007 to 2.5 percent in 2008. Meanwhile, cash reserves were sapped as health systems used savings for capital investments and pension funds and to post collateral on interest-rate hedges known as swaps.

As a result of these pressures, health system rating downgrades doubled in 2008, to 18, with S&P lowering the outlook for 27 systems, up from 14 such actions the previous year.

To learn more about the S&P report:
- read this Modern Healthcare piece (reg. req.)

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