Median financial ratios for nonprofit hospitals and health systems improved before the COVID-19 pandemic, which will provide some financial cushion to withstand financial pressures, according to a report from Fitch Ratings.
The medians for 2019, based on 2018 data, showed the nonprofit hospital and health system sector stabilized after a period of operational softness. The medians for 2020, based on 2019 audited data, are expected to show improvement in operating margins driven by higher revenues, cost reductions and increased cash flow, Fitch said.
“We expect the 2020 medians will represent peak performance levels until the sector is able to recover from the effects of the pandemic on operations,” Fitch said.
The credit rating agency said the nonprofit healthcare sector is unlikely to stabilize until a COVID-19 vaccine is widely available.
“The sector has shown considerable resiliency over the years, weathering significant events such as the Great Recession and legislative changes to funding,” Fitch said. “However, the coronavirus presents entirely new and fundamental challenges for the sector in the short term in the form of volume and revenue disruption, and over the medium to longer term with expected deterioration of individual provider payor mixes and possible changes in the behavior of healthcare consumers.”