Fitch: Nonprofit Hospitals See Stability across Operations, Liquidity and Debt

CHICAGO--(BUSINESS WIRE)-- U.S. Nonprofit hospitals and healthcare systems saw broad stability in their operating performance, liquidity and leverage in 2015, though a more challenging environment is expected for the remainder for 2016 and beyond, according to a Fitch Ratings report.

"Fitch's rated Nonprofit Hospital sector has a stable rating outlook, with issuers demonstrating stability across all rating categories. However, we maintain a negative sector outlook reflecting our expectation that many of the expected pressures from healthcare reform have not been diminished, only deferred," said Emily Wadhwani, Director in Fitch's U.S. Public Finance group.

The year 2015 was the second consecutive year of improvement in operations and profitability as a result of a continued focus on improving operating cost efficiencies, expanded coverage under ACA, and revenue cycle improvement. Fitch believes operating performance and profitability will be more volatile in 2016 reflecting Medicare population growth, CMS' further implementation of value-based reimbursement models, and increased Medicaid patient services.

Liquidity metrics were virtually unchanged from the prior year despite relatively volatile investment markets reflecting solid cash flow generation, moderate capital spending, and a diversified investment approach. Overall median leverage ratios were unchanged to slightly improved, continuing a longer term trend towards a moderating leverage position. The further moderation in median debt and leverage ratios reflects the constrained capital spending, a favorable interest rate environment, moderate revenue growth, and improved profitability.

Rating actions during 2015 displayed a distinctly positive trend, with 146 affirmations, 9 downgrades and 33 upgrades. Drivers of negative rating actions included weaker core operating performance due to declining utilization, an inability to manage expenditures, and/or a material increase in debt. Upgrades were reflective of solid cash flow leading to strong coverage and growth in liquidity, and acquisition by a higher rated entity.

Rating actions in 2016 are decidedly more balanced compared to 2014 and 2015. Through July 31, there have been 82 rating affirmations, 12 rating downgrades and 12 rating upgrades.

Additional information is available on www.fitchratings.com

Related Research

2016 Median Ratios for Nonprofit Hospitals and Healthcare Systems

https://www.fitchratings.com/site/re/887146

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View source version on businesswire.com: http://www.businesswire.com/news/home/20160907006171/en/

Fitch Ratings
James LeBuhn
Senior Director
+1 312-368-2059
Fitch Ratings
70 W. Madison Street
Chicago, IL 60602
or
Emily Wadhwani
Director
+1 312-368-3347
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
[email protected]

Source: Fitch Ratings

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