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Rating Agencies Update: Margins under Pressure but Balance Sheets Improve
10/11/2017

Rating Agencies Update: Margins under Pressure but Balance Sheets Improve

After one of the best years in recent memory in 2015, the last 18 months have been a challenge for nonprofit hospitals. A tight labor market coupled with lackluster investment returns resulted in a deterioration in excess margin. Consequently, debt service coverage was weaker in 2016. However, balance sheets continue to strengthen, as most hospitals and hospital systems continue to deliver. Readers may recall that 2014 showed improvement for the higher rating categories (A-rated and above), but the lower investment-grade and non-investment grade categories struggled. In 2015, the positive trend continued for the higher rated providers, but the improvement was more widely disbursed. In 2016, the trend reversed as median ratios deteriorated for all rating categories.