In its annual Median Ratios for Nonprofit Hospitals and Healthcare Systems report, Fitch Ratings says that after nearly a half decade of consistent improvement or stability in hospital financial metrics, the 2009 medians for acute care hospitals showed declines for most financial indicators. Many 2009 medians fell to figures comparable to those of three to five years ago, but generally remained adequate relative to the individual rating categories.
According to the report, large losses in hospital investment portfolios, as high as 30 percent to 40 percent, took their toll on liquidity, while bottom-line profitability and coverage by earnings before taxes, interest, depreciation, and amortization (EBITDA) were squeezed by the significant year-over-year drop in investment income and higher cost of capital. As a result, median figures for days cash on hand, excess margin, and coverage by EBITDA fell 14 percent, 50 percent, and 24 percent, respectively, year over year.
Fitch currently maintains a negative outlook for the not-for-profit hospital and healthcare system sectors as a whole. Fitch anticipates that many of the negative pressures facing its rated borrowers will continue to exert varying levels of stress over the near term and, over the next 12 to 24 months, downgrades will exceed upgrades, although with affirmations remaining the most common rating action.
