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.
The New York-based ratings firm revealed that 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 EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) 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 (DCOH), 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 nonprofit hospital and healthcare system sectors as a whole.
The firm 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 12-24 months, downgrades will exceed upgrades, although with affirmations remaining the most common rating action.