Fitch: U.S. NFP Children's Hospital Medians Display Improvement

CHICAGO--(BUSINESS WIRE)-- Standalone children's hospitals continue to demonstrate a strong and unique credit profile as compared to the entire U.S. not-for-profit (NFP) hospital and healthcare sector, according to a new report by Fitch Ratings.

The average rating for the 12 standalone children's hospitals rated by Fitch is 'AA-', which is higher than the average rating of 'A' throughout Fitch's general NFP hospital and health system universe. The higher average rating reflects children's hospitals' unique credit profile, robust liquidity, strong philanthropic support, and specialized clinical services.

In the report, Fitch analyzed median ratios exclusive to stand alone children's hospitals for the 2014 operating year. While median operating profitability was down year over year, it remained very solid resulting in strong debt service coverage above 6.0x. In addition, key liquidity metrics strengthened in 2014 over 2013 with median days cash on hand increasing to 323.5 from 289.1 days.

High exposure to Medicaid payors remains the primary credit concern, as it makes children's hospitals highly sensitive to budget cuts at the state and federal level. However, children's hospitals have historically been protected against funding reductions and/ or reimbursement cuts under the Medicaid program. Several children's hospitals have been extending their service area reach by increasing their outpatient services and by aligning with general acute care providers which should better position them for the development of managed Medicaid program and value based reimbursement models.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: 2015 Median Ratios for Not-for-Profit Children's Hospitals

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865712

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Fitch Ratings
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Fitch Ratings, Inc.
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Dmitry Feofilaktov
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Source: Fitch Ratings

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