Nonprofit hospitals vulnerable to coronavirus-related market fallout, Fitch says

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Continued market losses prompted by the COVID-19 pandemic will likely weaken key liquidity metrics and pressure the ratings of some nonprofit hospitals, according to a new Fitch Ratings report. 

About half of Fitch’s rated nonprofit hospitals have 10 percent to 40 percent of their portfolios invested in equities, but other nonprofit hospitals exceed this range by a wide margin, Fitch noted.

Throughout the last month, the stock market suffered historic losses, which caused hospitals with more aggressive asset allocation to underperform their more conservative counterparts by 10 percent to 25 percent, Fitch said. 

Fitch said that hospitals in the last few weeks have seen a median loss of about 30 days of cash on hand. It noted this metric is not “an immediate concern yet, given the ample liquidity these hospitals have.”

But Fitch said most hospitals have cash on hand to fund about 200 days of operations.

The ratings agency said the market likely will remain volatile, and “time will tell if and how the stock market declines eat into a hospital’s reserves.”