Citing more severe than expected macro headwinds, Fitch revised its sector outlook for nonprofit hospitals and health systems to “deteriorating” Aug. 16.
Nonprofit hospitals have been hamstrung by labor and broader macro inflationary pressures that “are rendering the sector even more vulnerable to future stress,” Fitch senior director Kevin Holloran said in an Aug. 16 news release. Investment losses have also contributed to a rockier 2022 than anticipated, and operating metrics are down significantly compared to last year.
“While severe volume disruption to operations appears to be waning, elevated expense pressure remains pronounced,” Mr. Holloran said. “Even if macro inflation cools, labor expenses may be reset at a permanently higher level for the rest of 2022, and likely well beyond.”
Many nonprofit hospitals and health systems are expected to violate debt service coverage covenants this year, according to the news release.
Read the full report here.