May 7—U.S. not-for-profit children’s hospitals’ median ratios are still strong, but have lost their wide margin of financial strength compared with all rated acute care stand-alone hospitals, according to a Standard & Poor’s Ratings Services report.

Standard & Poor’s expected some financial deterioration due to the economic slowdown since 2008, and what has occurred is in line with general industry trends, the report says. In addition to normal industry pressures, children’s hospitals, which are typically highly dependent on Medicaid revenue, have been subject to a general weakening of the state Medicaid programs. 

Furthermore, many children’s hospitals have recently completed or are in the midst of robust capital spending periods. To the extent that philanthropy has not covered capital projects, the increased capital spending has weakened balance sheets by adding debt and lowering unrestricted reserves, according to the report.

In a release, a representative for Standard & Poor’s said it is critical that children’s hospitals maintain their financial edge to help offset credit risks around a narrower business niche with a generally high concentration of governmental payer mix.

Publication Date: Tuesday, May 07, 2013