The outlook for the nonprofit hospital and healthcare system sector remains negative, according to Fitch Ratings’ 2009 Nonprofit Hospitals and Health Care Systems Outlook. The negative outlook reflects a weakened credit environment, aspects of which include constrained access to capital, a deteriorating payer mix, elevated interest rates, and severe investment losses.
Fitch says the combined effects of significant liquidity declines, increasing uncompensated care, and higher capital costs are adversely affecting many hospitals' credit profiles. Operating profitability is likely to depress well into 2010.
Fitch notes that many of its rated borrowers will be able to accommodate observed and expected performance deterioration within the tolerances of their assigned rating levels. The hospitals and systems most at risk will include those with extreme performance deterioration, those whose ratings are very close to the next lower rating level, and those with exacerbating circumstances, such as unavoidable capital spending commitments. Overall, Fitch expects that affirmations will constitute the bulk of its 2009 rating actions, with downgrades moderately outpacing upgrades.
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