Rating And Outlook Overview
The number of rated health care systems slightly increased. The number of systems rated by S&P Global Ratings rose to 173, of which 161 (or 93%) are included in the 2023 medians. This increase, despite ongoing system consolidation, is mostly due to new issuers seeking ratings, as well as stand-alone hospitals transitioning to systems per our criteria, given revenue growth and added acute care facilities.
System rating distribution has shifted from the 'AA' category, despite the inherent strength of systems. Higher-rated systems are characterized by robust enterprise profiles, greater scale and diversity than stand-alone hospitals, and seasoned management teams. However, they also remain subject to persistent broad sector headwinds that continue to affect operating performance. The number of systems rated in the 'AA' category fell to 39% of total rated systems, from 44% in 2022, with concurrent increases in the 'A' and 'BBB' categories. Speculative-grade rated systems remain rare, encompassing only four organizations, and are therefore excluded from tables 2, 3A, 3B, and 3C.
Rating distribution for systems generally skews toward higher rating categories than those for stand-alone hospitals. About 87% of systems are rated in the 'AA' and 'A' categories, compared with just 56% of stand-alone hospitals despite several of their financial medians being more favorable than those of systems. The median system rating is 'A+' compared with the stand-alone median of 'A-'.
Negative outlooks remain elevated. The systems rating distribution in higher categories is accompanied by generally lower rating volatility, where nonstable outlooks account for 23% of the outlook distribution, generally consistent with 2022, but more favorable than outlook distribution for stand-alone hospitals at 27%. That said, the percentage of negative outlooks for systems in 2023 and year-to-date through June 2024, although unchanged, is about double 2022 levels, highlighting operational headwinds the sector faced. Positive outlooks have remained largely consistent in the past three years at less than 5%.
Chart 1
Chart 2
Key Median Takeaways
Given the uneven performance recovery and impacts to various health system ratios including those on the balance sheet, we've again provided an additional view of the overall system median data with lower and upper half medians for select financial metrics to highlight dispersion of the median data and also compared that data with data for 2022 and 2019, the last year of medians before the COVID-19 pandemic.
Operations are improving incrementally while reliance on nonrecurring revenue funding diminishes. Operating margin for systems returned to breakeven; although without one-time support, such as Federal Emergency Management Agency (FEMA) and 340B settlements, underlying operating margin would be negative but improved from 2022. With the improved performance, 2022 remains the only year in the past decade where the operating performance was negative. In the short term, we believe that the sector will be tested to return to historical profitability levels, in part due to persistent, albeit abating, labor and inflationary pressures. Nevertheless, overall median performance improvement was notable in the 'AA' and 'BBB' categories, while the 'A' category reported margins generally were unchanged from the previous year. Within the 'BBB' category, however, systems at the higher end of the spectrum reported increased profitability, contrary to 'BBB' and 'BBB-' systems where accelerating losses could, over time, lead to ratings pressure if not remedied. Maximum annual debt service coverage remains well below historical ranges for systems as a whole, although any relative median improvement from 2022 for different rating categories and individual ratings was mixed.
Cash on hand is weaker despite higher unrestricted reserves. Unrestricted reserves at most rating levels increased from 2022; however, days' cash on hand (DCOH) for systems continued a multiyear decline, with all but the 'AA' and 'AA-' rating categories reporting lower year-over-year medians. While a higher expense base continues to weigh on DCOH, rising unrestricted reserves support higher cash to debt, which remains below 2021 highs, but in line with historical trends. However, unrestricted reserves for 'BBB' and 'BBB-' rated systems fell markedly, as providers in this category continue to grapple with mounting operating losses. Although many systems modulated capital expenditures during the pandemic to preserve liquidity, systems increasingly spent on routine and strategic projects. Capital spending was materially higher in 2022 and 2023 compared with 2021 lows, a trend we expect will continue in the near-to-medium term and that could result in rising leverage metrics in the future to the extent projects are debt funded, perhaps with the offset of providing greater stability in unrestricted reserves.
The debt profile remains largely stable, with healthy pension funded status above historical levels. Leverage metrics, as measured by long-term debt to capitalization and the debt burden, were stable to modestly improved and in line with historical levels, with the exception of 2021, when debt issuance was limited due to the pandemic. Nevertheless, the 'BBB' and 'BBB-' ratings remain outliers, as rising debt burdens and lower capitalization from continued and increasing operating losses contributed to higher leverage. In the past three years, the debt burden for systems has remained remarkedly consistent at 2.0%, with limited variability across all rating categories save for 'A-', which markedly rose to 2.7% from 2.0% in 2022. Pension funded status for systems, albeit slightly weaker than in 2022, remained above the 90% threshold, aided by higher interest rates, which have contributed to a meaningful improvement from 2020 levels of about 80%.
Salaries and benefits were above historical levels. Salaries and benefits to net patient revenues, which improved from 2022, remained higher than historical levels, as the sector still faces persistent labor pressures and as higher wages offered to address shortages are now part of the permanent expense base. We expect these expenses will remain elevated, reflecting changes to compensation structures necessary to retain adequate staffing and reduce turnover rates, although we're also seeing the onset of AI and outsourcing strategies that could change these trends over time.
Table 1
| U.S. not-for-profit health care system medians | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Fiscal year | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||
| Sample size | 161 | 156 | 156 | 153 | 146 | 142 | 144 | 146 | 142 | |||||||||||
| Financial performance | ||||||||||||||||||||
| Net patient revenue (NPR) ($000s) | 3,125,753 | 3,054,579 | 2,909,293 | 2,587,620 | 2,519,213 | 2,397,747 | 2,203,429 | 2,022,277 | 1,873,321 | |||||||||||
| Total operating revenue ($000s) | 3,592,273 | 3,576,230 | 3,379,365 | 3,089,200 | 2,877,252 | MNR | MNR | MNR | MNR | |||||||||||
| Total operating expenses ($000s) | 3,661,923 | 3,619,521 | 3,256,661 | MNR | MNR | MNR | MNR | MNR | MNR | |||||||||||
| Operating income ($000s) | 519 | (12,022) | 92,146 | MNR | MNR | MNR | MNR | MNR | MNR | |||||||||||
| Operating margin (%) | 0.0 | (0.4) | 2.5 | 1.2 | 2.7 | 2.3 | 2.2 | 2.4 | 3.6 | |||||||||||
| Net nonoperating income ($000s) | 55,782 | 54,404 | 106,017 | MNR | MNR | MNR | MNR | MNR | MNR | |||||||||||
| Excess income ($000s) | 41,195 | 25,184 | 215,663 | MNR | MNR | MNR | MNR | MNR | MNR | |||||||||||
| Excess margin (%) | 1.4 | 1.2 | 5.5 | 3.2 | 4.3 | 3.9 | 4.5 | 3.7 | 5.3 | |||||||||||
| Operating EBIDA margin (%) | 5.0 | 4.9 | 7.6 | 6.8 | 8.4 | 8.3 | 8.3 | 9.0 | 10.2 | |||||||||||
| EBIDA margin (%) | 6.2 | 6.1 | 10.6 | 8.6 | 9.8 | 10.0 | 10.3 | 9.9 | 11.5 | |||||||||||
| Net available for debt service ($000s) | 217,302 | 216,821 | 399,272 | 279,127 | 303,095 | 282,188 | 265,041 | 223,165 | 278,605 | |||||||||||
| Maximum annual debt service ($000s) | 79,641 | 74,446 | 76,372 | MNR | MNR | MNR | MNR | MNR | MNR | |||||||||||
| Maximum annual debt service coverage (x) | 3.0 | 3.2 | 5.5 | 4.1 | 4.4 | 4.4 | 4.5 | 4.3 | 5.0 | |||||||||||
| Operating lease-adjusted coverage (x) | 2.3 | 2.4 | 4.0 | 3.1 | 3.4 | 3.2 | 3.5 | 3.1 | 3.4 | |||||||||||
| Liquidity and financial flexibility | ||||||||||||||||||||
| Unrestricted reserves ($000s) | 1,858,072 | 1,845,341 | 2,220,248 | 1,961,547 | 1,604,728 | 1,484,081 | 1,402,672 | 1,213,897 | 1,191,485 | |||||||||||
| Unrestricted days' cash on hand | 192.7 | 206.9 | 259.3 | 236.7 | 218.3 | 213.3 | 205.5 | 197.6 | 205.5 | |||||||||||
| Unrestricted reserves/total long-term debt (%) | 175.7 | 169.5 | 213.2 | 189.3 | 175.6 | 175.1 | 173.3 | 169.5 | 161.0 | |||||||||||
| Unrestricted reserves/contingent liabilities (%)* | 716.7 | 845.0 | 884.3 | 794.1 | 645.8 | 594.1 | 546.3 | 507.6 | 462.6 | |||||||||||
| Average age of plant (years) | 12.1 | 11.9 | 11.6 | 11.1 | 11.0 | 10.6 | 10.8 | 10.6 | 10.5 | |||||||||||
| Capital expenditures/depreciation and amortization (%) | 125.7 | 121.9 | 109.4 | 120.0 | 134.4 | 133.3 | 132.3 | 125.1 | 126.0 | |||||||||||
| Debt and liabilities | ||||||||||||||||||||
| Total long-term debt ($000s) | 1,152,633 | 1,177,660 | 1,126,357 | MNR | MNR | MNR | MNR | MNR | MNR | |||||||||||
| Long-term debt/capitalization (%) | 31.1 | 31.5 | 28.7 | 31.9 | 31.6 | 31.7 | 32.3 | 34.0 | 33.7 | |||||||||||
| Contingent liabilities ($000s)* | 295,005 | 314,099 | 294,258 | MNR | MNR | MNR | MNR | MNR | MNR | |||||||||||
| Contingent liabilities/total long-term debt (%)* | 26.6 | 25.0 | 27.1 | 27.0 | 28.7 | 31.8 | 33.2 | 31.9 | 34.4 | |||||||||||
| Debt burden (%) | 2.0 | 2.0 | 2.0 | 2.1 | 2.2 | 2.2 | 2.2 | 2.3 | 2.3 | |||||||||||
| Defined-benefit plan funded status (%)* | 92.2 | 93.1 | 91.0 | 79.9 | 81.8 | 84.8 | 81.0 | 74.0 | 78.2 | |||||||||||
| Miscellaneous | ||||||||||||||||||||
| Salaries & benefits/NPR (%) | 59.2 | 60.4 | 58.9 | 62.0 | 58.3 | 57.9 | 57.9 | 57.2 | 56.4 | |||||||||||
| Nonoperating revenue/total revenue (%) | 1.4 | 1.5 | 3.1 | 1.9 | 1.9 | 1.7 | 2.1 | 1.1 | 2.0 | |||||||||||
| Cushion ratio (x) | 25.0 | 25.6 | 29.9 | 27.9 | 25.1 | 24.0 | 22.9 | 21.4 | 21.4 | |||||||||||
| Days in accounts receivable | 47.8 | 47.4 | 47.4 | 44.6 | 46.5 | 45.8 | 47.8 | 48.2 | 48.0 | |||||||||||
| Cash flow/total liabilities (%) | 9.3 | 8.8 | 14.9 | 10.1 | 14.9 | 14.3 | 15.3 | 13.9 | 16.2 | |||||||||||
| Pension-adjusted long-term debt/capitalization (%)* | 31.1 | 31.9 | 30.3 | 34.6 | 34.5 | 33.9 | 34.9 | 37.3 | 38.2 | |||||||||||
| Adjusted operating margin (%)§ | (0.5) | (1.7) | 0.6 | MNR | MNR | MNR | MNR | MNR | MNR | |||||||||||
| MNR--Median not reported. *These ratios are only for organizations that have defined-benefit pension plans or contingent liabilities. §Adjusted operating margin excludes nonrecurring operating revenues that are largely attributable to stimulus funding, FEMA reimbursement, and 340B settlement funding, but could comprise other nonrecurring items. | ||||||||||||||||||||
Table 2
| U.S. not-for-profit health care system medians by rating category -- 2023 vs. 2022 vs. 2021 | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AA | A | BBB | ||||||||||||||||||
| Fiscal year | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | |||||||||||
| Sample size | 60 | 62 | 67 | 79 | 75 | 73 | 18 | 14 | 12 | |||||||||||
| Financial performance | ||||||||||||||||||||
| Net patient revenue (NPR) ($000s) | 4,899,775 | 4,658,064 | 3,967,396 | 2,795,088 | 2,895,797 | 2,785,584 | 2,304,181 | 2,392,666 | 2,320,623 | |||||||||||
| Total operating revenue ($000s) | 5,740,319 | 5,486,145 | 4,857,985 | 3,207,936 | 3,160,358 | 3,004,399 | 2,618,338 | 2,557,140 | 2,643,573 | |||||||||||
| Total operating expenses ($000s) | 5,772,067 | 5,431,141 | 4,629,958 | 3,163,698 | 3,111,593 | 3,079,773 | 2,789,968 | 2,654,551 | 2,617,988 | |||||||||||
| Operating income ($000s) | 73,957 | 12,779 | 184,961 | (5,051) | (1,848) | 82,000 | (64,065) | (92,820) | 7,288 | |||||||||||
| Operating margin (%) | 1.4 | 0.4 | 3.7 | (0.2) | (0.1) | 1.9 | (2.6) | (3.7) | 0.3 | |||||||||||
| Net nonoperating income ($000s) | 111,208 | 101,641 | 200,264 | 46,445 | 52,779 | 76,792 | 25,531 | 13,304 | 59,622 | |||||||||||
| Excess income ($000s) | 141,965 | 148,921 | 398,348 | 31,554 | 22,001 | 145,488 | (49,049) | (112,101) | 54,324 | |||||||||||
| Excess margin (%) | 3.3 | 3.2 | 7.9 | 1.0 | 0.9 | 4.7 | (2.0) | (3.1) | 2.0 | |||||||||||
| Operating EBIDA margin (%) | 5.8 | 5.6 | 8.6 | 4.8 | 4.9 | 7.3 | 1.9 | 1.0 | 5.3 | |||||||||||
| EBIDA margin (%) | 7.9 | 8.2 | 13.2 | 6.2 | 6.0 | 9.9 | 2.7 | 1.4 | 7.5 | |||||||||||
| Net available for debt service ($000s) | 408,149 | 384,887 | 611,708 | 201,766 | 197,317 | 363,308 | 80,716 | 38,697 | 183,038 | |||||||||||
| Maximum annual debt service ($000s) | 108,741 | 107,364 | 89,372 | 73,554 | 72,198 | 70,783 | 61,104 | 48,879 | 49,835 | |||||||||||
| Maximum annual debt service coverage (x) | 4.5 | 4.3 | 6.8 | 2.7 | 3.2 | 4.7 | 1.3 | 0.9 | 4.4 | |||||||||||
| Operating lease-adjusted coverage (x) | 3.6 | 3.2 | 5.0 | 2.1 | 2.3 | 3.6 | 1.2 | 1.0 | 3.2 | |||||||||||
| Liquidity and financial flexibility | ||||||||||||||||||||
| Unrestricted reserves ($000s) | 3,825,161 | 3,803,049 | 4,171,453 | 1,396,730 | 1,502,579 | 1,685,564 | 721,688 | 651,105 | 980,645 | |||||||||||
| Unrestricted days' cash on hand | 249.8 | 263.4 | 326.3 | 172.4 | 179.2 | 214.6 | 94.1 | 104.0 | 122.8 | |||||||||||
| Unrestricted reserves/total long-term debt (%) | 263.7 | 261.6 | 297.4 | 145.2 | 143.9 | 171.5 | 83.9 | 114.4 | 133.9 | |||||||||||
| Unrestricted reserves/contingent liabilities (%)* | 952.8 | 996.5 | 1,036.6 | 553.8 | 590.5 | 613.3 | 561.6 | 780.3 | 911.0 | |||||||||||
| Average age of plant (years) | 11.4 | 11.3 | 10.8 | 12.2 | 12.5 | 12.1 | 13.9 | 13.1 | 13.4 | |||||||||||
| Capital expenditures/depreciation and amortization (%) | 130.2 | 129.3 | 120.5 | 130.2 | 119.0 | 108.4 | 99.8 | 94.9 | 105.0 | |||||||||||
| Debt and liabilities | ||||||||||||||||||||
| Total long-term debt ($000s) | 1,634,729 | 1,673,227 | 1,401,720 | 1,011,723 | 1,058,719 | 1,166,358 | 771,654 | 736,175 | 713,346 | |||||||||||
| Long-term debt/capitalization (%) | 22.4 | 23.6 | 21.4 | 35.5 | 37.3 | 32.1 | 43.4 | 41.3 | 39.4 | |||||||||||
| Contingent liabilities ($000s)* | 494,425 | 442,655 | 401,770 | 281,976 | 292,325 | 293,033 | 138,229 | 114,827 | 141,444 | |||||||||||
| Contingent liabilities/total long-term debt (%)* | 29.0 | 27.6 | 30.3 | 25.0 | 22.9 | 26.4 | 18.2 | 16.7 | 21.4 | |||||||||||
| Debt burden (%) | 1.8 | 1.8 | 1.9 | 2.1 | 2.0 | 2.0 | 2.1 | 1.8 | 2.0 | |||||||||||
| Defined-benefit plan funded status (%)* | 96.0 | 93.5 | 91.7 | 92.2 | 94.7 | 90.2 | 88.5 | 80.9 | 85.5 | |||||||||||
| Miscellaneous | ||||||||||||||||||||
| Salaries & benefits/NPR (%) | 58.4 | 60.2 | 57.6 | 59.2 | 59.7 | 58.3 | 62.7 | 63.7 | 63.8 | |||||||||||
| Nonoperating revenue/total revenue (%) | 1.8 | 1.9 | 4.5 | 1.2 | 1.3 | 2.8 | 0.7 | 0.5 | 1.8 | |||||||||||
| Cushion ratio (x) | 36.1 | 36.9 | 42.7 | 21.0 | 21.4 | 25.1 | 11.3 | 14.9 | 16.6 | |||||||||||
| Days in accounts receivable | 47.0 | 48.3 | 47.8 | 47.8 | 46.6 | 45.4 | 50.1 | 41.6 | 42.5 | |||||||||||
| Cash flow/total liabilities (%) | 13.4 | 13.3 | 20.7 | 8.4 | 8.0 | 13.2 | 1.7 | 0.7 | 9.8 | |||||||||||
| Pension-adjusted long-term debt/capitalization (%)* | 23.2 | 24.2 | 22.3 | 36.6 | 37.4 | 34.3 | 45.0 | 44.2 | 43.1 | |||||||||||
| Adjusted operating margin (%)§ | 0.9 | (1.0) | 1.6 | (1.0) | (1.4) | 0.1 | (3.1) | (4.8) | (1.8) | |||||||||||
| *These ratios are only for organizations that have defined-benefit pension plans or contingent liabilities. §Adjusted operating margin excludes nonrecurring operating revenues that are largely attributable to stimulus funding, FEMA reimbursement, and 340B settlement funding, but could comprise other nonrecurring items. | ||||||||||||||||||||
Table 3A
| U.S. not-for-profit health care system medians by rating level -- 2023 vs. 2022 vs. 2021 | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AA+ | AA | AA- | ||||||||||||||||||
| Fiscal year | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | |||||||||||
| Sample size | 6 | 7 | 7 | 18 | 22 | 24 | 36 | 33 | 36 | |||||||||||
| Financial performance | ||||||||||||||||||||
| Net patient revenue (NPR) ($000s) | 6,807,592 | 5,181,372 | 4,806,946 | 6,776,815 | 5,171,948 | 4,409,886 | 3,466,604 | 3,951,733 | 3,231,647 | |||||||||||
| Total operating revenue ($000s) | 7,212,048 | 5,411,848 | 5,090,381 | 7,327,114 | 5,991,229 | 5,319,909 | 4,569,500 | 4,883,440 | 3,824,089 | |||||||||||
| Total operating expenses ($000s) | 7,021,309 | 5,123,893 | 4,620,686 | 6,948,416 | 5,859,156 | 5,141,836 | 4,506,093 | 5,093,631 | 3,687,587 | |||||||||||
| Operating income ($000s) | 146,816 | 116,489 | 414,846 | 151,700 | 44,073 | 185,339 | 4,059 | (45,606) | 117,865 | |||||||||||
| Operating margin (%) | 1.7 | 1.2 | 6.4 | 1.9 | 1.1 | 4.0 | 0.1 | (0.9) | 2.8 | |||||||||||
| Net nonoperating income ($000s) | 265,807 | 347,511 | 507,674 | 157,280 | 115,692 | 310,496 | 87,210 | 57,896 | 157,639 | |||||||||||
| Excess income ($000s) | 424,419 | 464,000 | 888,378 | 408,420 | 199,885 | 514,701 | 72,385 | 85,907 | 263,968 | |||||||||||
| Excess margin (%) | 4.6 | 4.6 | 13.1 | 5.7 | 3.8 | 9.8 | 1.4 | 1.2 | 6.8 | |||||||||||
| Operating EBIDA margin (%) | 6.8 | 8.6 | 12.6 | 6.5 | 6.2 | 9.3 | 5.2 | 5.0 | 8.2 | |||||||||||
| EBIDA margin (%) | 9.5 | 10.7 | 18.2 | 9.8 | 8.9 | 14.2 | 6.1 | 6.7 | 11.7 | |||||||||||
| Net available for debt service ($000s) | 787,454 | 988,665 | 1,251,308 | 819,539 | 477,778 | 758,893 | 277,884 | 269,413 | 425,353 | |||||||||||
| Maximum annual debt service ($000s) | 121,384 | 118,159 | 122,069 | 115,688 | 104,752 | 87,494 | 79,234 | 71,650 | 75,263 | |||||||||||
| Maximum annual debt service coverage (x) | 6.5 | 6.9 | 11.6 | 6.8 | 4.9 | 8.0 | 3.2 | 3.4 | 6.1 | |||||||||||
| Operating lease-adjusted coverage (x) | 4.7 | 6.1 | 9.0 | 5.0 | 3.7 | 5.4 | 2.7 | 2.8 | 4.4 | |||||||||||
| Liquidity and financial flexibility | ||||||||||||||||||||
| Unrestricted reserves ($000s) | 8,880,922 | 7,346,841 | 8,274,533 | 6,923,716 | 5,176,366 | 5,428,508 | 2,989,289 | 2,980,232 | 2,800,238 | |||||||||||
| Unrestricted days' cash on hand | 389.2 | 433.3 | 525.1 | 303.8 | 294.1 | 350.8 | 238.1 | 232.8 | 291.9 | |||||||||||
| Unrestricted reserves/total long-term debt (%) | 403.8 | 364.6 | 466.6 | 321.7 | 294.7 | 334.9 | 229.0 | 214.2 | 263.6 | |||||||||||
| Unrestricted reserves/contingent liabilities (%)* | 1,726.5 | 1,479.7 | 1,579.6 | 1,009.7 | 968.1 | 1,036.6 | 910.7 | 927.1 | 893.5 | |||||||||||
| Average age of plant (years) | 9.5 | 8.8 | 8.7 | 11.4 | 11.3 | 11.3 | 11.9 | 11.4 | 10.8 | |||||||||||
| Capital expenditures/depreciation and amortization (%) | 141.8 | 126.6 | 105.0 | 150.8 | 152.7 | 148.9 | 118.7 | 122.3 | 105.4 | |||||||||||
| Debt and liabilities | ||||||||||||||||||||
| Total long-term debt ($000s) | 1,957,927 | 2,013,223 | 1,896,127 | 2,124,514 | 1,662,468 | 1,425,146 | 1,252,083 | 1,530,000 | 1,015,854 | |||||||||||
| Long-term debt/capitalization (%) | 18.3 | 20.3 | 16.4 | 19.8 | 22.4 | 20.0 | 25.8 | 28.1 | 25.0 | |||||||||||
| Contingent liabilities ($000s)* | 606,675 | 775,553 | 790,133 | 641,992 | 650,624 | 491,170 | 341,660 | 283,360 | 286,172 | |||||||||||
| Contingent liabilities/total long-term debt (%)* | 26.4 | 26.4 | 30.3 | 33.1 | 33.3 | 31.3 | 27.0 | 20.9 | 24.9 | |||||||||||
| Debt burden (%) | 1.5 | 1.7 | 1.5 | 1.5 | 1.6 | 1.6 | 1.9 | 2.1 | 2.0 | |||||||||||
| Defined-benefit plan funded status (%)* | 95.9 | 94.6 | 93.7 | 96.0 | 91.6 | 90.4 | 96.0 | 93.5 | 94.4 | |||||||||||
| Miscellaneous | ||||||||||||||||||||
| Salaries & benefits/NPR (%) | 57.6 | 57.3 | 54.3 | 60.0 | 60.0 | 59.8 | 58.0 | 60.7 | 57.6 | |||||||||||
| Nonoperating revenue/total revenue (%) | 3.0 | 5.8 | 6.5 | 2.5 | 2.6 | 4.3 | 1.6 | 1.5 | 4.0 | |||||||||||
| Cushion ratio (x) | 64.1 | 60.5 | 75.9 | 45.6 | 44.6 | 47.9 | 32.7 | 31.0 | 35.7 | |||||||||||
| Days in accounts receivable | 45.0 | 39.4 | 44.5 | 50.6 | 48.9 | 49.0 | 46.3 | 46.4 | 47.9 | |||||||||||
| Cash flow/total liabilities (%) | 16.2 | 21.0 | 34.0 | 19.4 | 14.1 | 23.2 | 10.2 | 9.0 | 16.7 | |||||||||||
| Pension-adjusted long-term debt/capitalization (%)* | 18.6 | 20.6 | 16.6 | 19.6 | 22.2 | 20.3 | 26.1 | 28.2 | 26.7 | |||||||||||
| Adjusted operating margin (%)§ | 0.3 | 1.1 | 5.2 | 1.9 | 0.2 | 2.2 | (0.1) | (1.7) | 1.1 | |||||||||||
| *These ratios are only for organizations that have defined-benefit pension plans or contingent liabilities. §Adjusted operating margin excludes nonrecurring operating revenues that are largely attributable to stimulus funding, FEMA reimbursement, and 340B settlement funding, but could comprise other nonrecurring items. | ||||||||||||||||||||
Table 3B
| U.S. not-for-profit health care system medians by rating level -- 2023 vs. 2022 vs. 2021 | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| A+ | A | A- | ||||||||||||||||||
| Fiscal year | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | |||||||||||
| Sample size | 28 | 29 | 29 | 37 | 33 | 32 | 14 | 13 | 12 | |||||||||||
| Financial performance | ||||||||||||||||||||
| Net patient revenue (NPR) ($000s) | 3,040,851 | 2,719,320 | 2,574,590 | 3,101,674 | 3,103,344 | 3,301,950 | 2,237,754 | 2,485,744 | 2,151,080 | |||||||||||
| Total operating revenue ($000s) | 3,374,102 | 3,124,358 | 2,998,072 | 3,424,212 | 3,561,273 | 3,511,073 | 2,504,532 | 2,615,198 | 2,525,214 | |||||||||||
| Total operating expenses ($000s) | 3,498,543 | 3,072,828 | 2,883,645 | 3,504,106 | 3,589,731 | 3,371,951 | 2,455,922 | 2,538,202 | 2,388,333 | |||||||||||
| Operating income ($000s) | 1,476 | 12,765 | 94,222 | (21,148) | (31,079) | 82,687 | 11,070 | 13,198 | 70,095 | |||||||||||
| Operating margin (%) | 0.1 | 0.4 | 3.8 | (1.0) | (1.2) | 1.9 | 0.4 | 0.5 | 1.4 | |||||||||||
| Net nonoperating income ($000s) | 53,035 | 54,377 | 92,594 | 50,658 | 56,237 | 69,765 | 20,153 | 42,512 | 54,300 | |||||||||||
| Excess income ($000s) | 35,964 | 43,520 | 207,165 | 14,015 | 10,125 | 139,808 | 46,608 | 36,130 | 86,877 | |||||||||||
| Excess margin (%) | 1.5 | 1.8 | 5.3 | 0.5 | 0.3 | 4.0 | 1.7 | 0.9 | 4.0 | |||||||||||
| Operating EBIDA margin (%) | 5.7 | 5.5 | 9.0 | 4.0 | 4.0 | 6.9 | 5.0 | 5.7 | 6.6 | |||||||||||
| EBIDA margin (%) | 7.2 | 6.8 | 11.2 | 5.8 | 5.4 | 9.0 | 6.4 | 6.0 | 10.3 | |||||||||||
| Net available for debt service ($000s) | 196,701 | 229,407 | 409,123 | 205,558 | 163,305 | 378,589 | 186,409 | 151,926 | 255,243 | |||||||||||
| Maximum annual debt service ($000s) | 72,291 | 67,489 | 62,797 | 74,446 | 73,508 | 81,381 | 63,723 | 74,446 | 74,293 | |||||||||||
| Maximum annual debt service coverage (x) | 3.2 | 4.0 | 5.5 | 2.3 | 2.3 | 4.4 | 2.8 | 3.3 | 4.1 | |||||||||||
| Operating lease-adjusted coverage (x) | 2.5 | 2.6 | 4.2 | 2.0 | 2.0 | 3.3 | 2.1 | 2.1 | 3.0 | |||||||||||
| Liquidity and financial flexibility | ||||||||||||||||||||
| Unrestricted reserves ($000s) | 1,465,289 | 1,546,612 | 1,595,093 | 1,503,006 | 1,621,747 | 1,834,266 | 1,181,834 | 1,295,432 | 1,476,126 | |||||||||||
| Unrestricted days' cash on hand | 193.7 | 196.6 | 243.9 | 136.6 | 153.6 | 187.8 | 168.0 | 177.0 | 215.8 | |||||||||||
| Unrestricted reserves/total long-term debt (%) | 178.2 | 164.5 | 193.8 | 131.4 | 131.3 | 161.1 | 114.1 | 115.1 | 142.6 | |||||||||||
| Unrestricted reserves/contingent liabilities (%)* | 613.1 | 712.5 | 943.3 | 523.3 | 542.8 | 605.3 | 469.9 | 586.6 | 509.0 | |||||||||||
| Average age of plant (years) | 12.3 | 12.4 | 12.0 | 12.2 | 12.2 | 12.1 | 12.6 | 14.1 | 12.6 | |||||||||||
| Capital expenditures/depreciation and amortization (%) | 141.0 | 121.7 | 106.2 | 119.1 | 119.1 | 110.7 | 157.3 | 110.0 | 99.3 | |||||||||||
| Debt and liabilities | ||||||||||||||||||||
| Total long-term debt ($000s) | 947,724 | 958,611 | 817,382 | 1,145,483 | 1,177,660 | 1,353,718 | 870,681 | 1,218,340 | 1,204,656 | |||||||||||
| Long-term debt/capitalization (%) | 29.2 | 30.2 | 28.8 | 37.7 | 38.9 | 35.6 | 40.2 | 41.6 | 41.0 | |||||||||||
| Contingent liabilities ($000s)* | 245,563 | 180,050 | 222,398 | 292,325 | 292,325 | 293,033 | 263,508 | 415,810 | 336,250 | |||||||||||
| Contingent liabilities/total long-term debt (%)* | 24.9 | 22.9 | 25.1 | 25.3 | 24.2 | 26.2 | 23.6 | 22.8 | 27.2 | |||||||||||
| Debt burden (%) | 2.1 | 2.0 | 1.9 | 2.0 | 2.0 | 2.0 | 2.7 | 2.0 | 2.2 | |||||||||||
| Defined-benefit plan funded status (%)* | 95.0 | 96.9 | 92.1 | 90.8 | 88.4 | 84.8 | 96.0 | 96.5 | 93.8 | |||||||||||
| Miscellaneous | ||||||||||||||||||||
| Salaries & benefits/NPR (%) | 58.8 | 58.2 | 56.8 | 63.4 | 64.6 | 61.3 | 57.1 | 57.4 | 57.4 | |||||||||||
| Nonoperating revenue/total revenue (%) | 1.5 | 1.1 | 3.1 | 1.2 | 1.6 | 2.2 | 0.9 | 0.7 | 2.5 | |||||||||||
| Cushion ratio (x) | 23.5 | 23.5 | 28.8 | 19.4 | 20.5 | 24.5 | 16.7 | 18.8 | 22.4 | |||||||||||
| Days in accounts receivable | 47.3 | 46.1 | 49.0 | 48.7 | 47.1 | 45.2 | 43.7 | 47.6 | 44.6 | |||||||||||
| Cash flow/total liabilities (%) | 11.7 | 12.0 | 14.9 | 6.6 | 7.5 | 12.3 | 7.4 | 5.8 | 11.1 | |||||||||||
| Pension-adjusted long-term debt/capitalization (%)* | 29.5 | 30.4 | 29.0 | 39.0 | 39.8 | 38.4 | 40.4 | 42.2 | 42.6 | |||||||||||
| Adjusted operating margin (%)§ | (0.4) | (0.7) | 0.8 | (1.7) | (3.3) | (0.1) | (1.1) | (0.5) | (0.6) | |||||||||||
| *These ratios are only for organizations that have defined-benefit pension plans or contingent liabilities. §Adjusted operating margin excludes nonrecurring operating revenues that are largely attributable to stimulus funding, FEMA reimbursement, and 340B settlement funding, but could comprise other nonrecurring items. | ||||||||||||||||||||
Table 3C
| U.S. not-for-profit health care system medians by rating level -- 2023 vs. 2022 vs. 2021 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| BBB+ | BBB/BBB- | |||||||||||||
| Fiscal year | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | ||||||||
| Sample size | 9 | 10 | 8 | 9 | 4 | 4 | ||||||||
| Financial performance | ||||||||||||||
| Net patient revenue (NPR) ($000s) | 3,189,418 | 2,418,067 | 2,320,623 | 1,956,119 | 2,104,044 | 3,233,651 | ||||||||
| Total operating revenue ($000s) | 3,518,947 | 2,683,873 | 2,643,573 | 2,562,006 | 2,274,531 | 4,230,599 | ||||||||
| Total operating expenses ($000s) | 3,592,736 | 2,775,239 | 2,617,988 | 2,631,692 | 2,308,153 | 4,392,184 | ||||||||
| Operating income ($000s) | (9,647) | (92,820) | 7,333 | (69,686) | (63,403) | (127,347) | ||||||||
| Operating margin (%) | (0.6) | (4.2) | 0.3 | (2.7) | (0.9) | (1.4) | ||||||||
| Net nonoperating income ($000s) | 40,000 | 25,951 | 65,866 | 3,895 | (5,095) | 45,374 | ||||||||
| Excess income ($000s) | 1,329 | (115,954) | 66,118 | (50,537) | (68,497) | (73,023) | ||||||||
| Excess margin (%) | 0.0 | (3.3) | 2.5 | (2.3) | (2.1) | (0.4) | ||||||||
| Operating EBIDA margin (%) | 2.1 | 0.3 | 5.3 | 1.6 | 4.1 | 3.6 | ||||||||
| EBIDA margin (%) | 3.2 | 1.2 | 7.5 | 1.9 | 4.2 | 5.0 | ||||||||
| Net available for debt service ($000s) | 108,257 | 30,429 | 219,065 | 35,614 | 112,436 | 116,968 | ||||||||
| Maximum annual debt service ($000s) | 65,816 | 53,002 | 49,835 | 55,484 | 45,156 | 90,769 | ||||||||
| Maximum annual debt service coverage (x) | 1.6 | 0.8 | 4.6 | 1.0 | 1.3 | 1.5 | ||||||||
| Operating lease-adjusted coverage (x) | 1.4 | 0.9 | 3.2 | 1.0 | 1.2 | 1.4 | ||||||||
| Liquidity and financial flexibility | ||||||||||||||
| Unrestricted reserves ($000s) | 821,229 | 651,105 | 980,645 | 466,127 | 744,782 | 1,243,773 | ||||||||
| Unrestricted days' cash on hand | 101.5 | 104.5 | 147.5 | 84.9 | 99.0 | 104.3 | ||||||||
| Unrestricted reserves/total long-term debt (%) | 130.9 | 130.8 | 195.6 | 66.8 | 74.1 | 89.6 | ||||||||
| Unrestricted reserves/contingent liabilities (%)* | 640.7 | 573.5 | 911.0 | 421.9 | 1,305.8 | 837.8 | ||||||||
| Average age of plant (years) | 12.6 | 12.6 | 13.4 | 14.0 | 13.6 | 11.5 | ||||||||
| Capital expenditures/depreciation and amortization (%) | 91.5 | 87.9 | 97.7 | 108.0 | 117.2 | 164.4 | ||||||||
| Debt and liabilities | ||||||||||||||
| Total long-term debt ($000s) | 737,901 | 784,442 | 615,672 | 814,795 | 622,416 | 1,452,435 | ||||||||
| Long-term debt/capitalization (%) | 34.6 | 39.7 | 30.5 | 56.4 | 52.6 | 53.2 | ||||||||
| Contingent liabilities ($000s)* | 200,000 | 95,123 | 110,650 | 123,465 | 134,530 | 290,761 | ||||||||
| Contingent liabilities/total long-term debt (%)* | 26.5 | 24.9 | 26.2 | 5.6 | 5.8 | 14.0 | ||||||||
| Debt burden (%) | 1.6 | 1.7 | 1.7 | 2.2 | 2.2 | 2.1 | ||||||||
| Defined-benefit plan funded status (%)* | 89.3 | 80.9 | 84.2 | 86.4 | 84.2 | 85.5 | ||||||||
| Miscellaneous | ||||||||||||||
| Salaries & benefits/NPR (%) | 62.7 | 65.8 | 67.2 | 62.8 | 60.4 | 63.1 | ||||||||
| Nonoperating revenue/total revenue (%) | 1.3 | 0.8 | 2.4 | 0.3 | (0.4) | 1.2 | ||||||||
| Cushion ratio (x) | 15.9 | 15.5 | 21.5 | 10.2 | 9.9 | 13.8 | ||||||||
| Days in accounts receivable | 41.1 | 41.6 | 39.0 | 51.2 | 44.6 | 48.7 | ||||||||
| Cash flow/total liabilities (%) | 7.1 | 0.5 | 11.3 | 1.5 | 2.6 | 3.0 | ||||||||
| Pension-adjusted long-term debt/capitalization (%)* | 35.3 | 41.2 | 35.2 | 56.4 | 55.0 | 52.9 | ||||||||
| Adjusted operating margin (%)§ | (3.1) | (5.6) | (0.3) | (3.1) | (2.0) | (5.6) | ||||||||
| *These ratios are only for organizations that have defined-benefit pension plans or contingent liabilities. §Adjusted operating margin excludes nonrecurring operating revenues that are largely attributable to stimulus funding, FEMA reimbursement, and 340B settlement funding, but could comprise other nonrecurring items. | ||||||||||||||
Table 4
| U.S. not-for-profit health care system median analysis -- 2023 vs. 2022 vs. 2019 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2019 | |||||||
| Selected financial metrics | Medians - lower half | Medians - overall | Medians - upper half | Medians - lower half | Medians - overall | Medians - upper half | Medians - lower half | Medians - overall | Medians - upper half |
| Operating margin (%) | (2.6) | 0.0 | 1.8 | (2.7) | (0.4) | 1.7 | 0.7 | 2.7 | 4.2 |
| EBIDA margin (%) | 3.5 | 6.2 | 8.9 | 3.0 | 6.1 | 9.2 | 7.6 | 9.8 | 12.6 |
| Maximum annual debt service coverage (x) | 1.8 | 3.0 | 4.8 | 1.5 | 3.2 | 4.5 | 3.4 | 4.4 | 6.1 |
| Unrestricted days' cash on hand | 131.7 | 192.7 | 248.0 | 145.9 | 206.9 | 260.0 | 155.5 | 218.3 | 290.6 |
| Unrestricted reserves/total long-term debt (%) | 122.7 | 175.7 | 248.2 | 126.4 | 169.5 | 247.0 | 132.8 | 175.6 | 242.9 |
Ratio Analysis
We view ratio analysis as an important tool in our assessment of the credit quality of not-for-profit health care organizations in addition to other key considerations including our analysis of enterprise profile factors and forward-looking views relative to both the business and financial positions. The median ratios offer a snapshot of the financial profile and help in the comparison of issuers across rating categories. Tracking median ratios over time also presents a clearer understanding of industrywide trends and provides a tool to better assess the sector's future credit quality.
The audited financial statements used for medians and in our analysis include both obligated and nonobligated group members. For the medians, unrestricted reserves exclude Medicare advance payments, and total operating revenue includes all recognized stimulus funding, FEMA reimbursement, and 340B settlement funding.
Related Research
- U.S. Not-For-Profit Acute Health Care 2023 Medians: Remarkably Level With Prior Year, But Performance Remains Notably Below Historical Norms, Aug. 7, 2024
- U.S. Not-For-Profit Health Care Stand-Alone Hospital Median Financial Ratios--2023, Aug. 7, 2024
- U.S. Not-For-Profit Health Care Children’s Hospital Median Financial Ratios--2023, Aug. 7, 2024
- U.S. Not-For-Profit Acute Health Care Speculative-Grade Median Financial Ratios--2023, Aug. 7, 2024
- U.S. Not-For-Profit Health Care Small Stand-Alone Hospital Median Financial Ratios--2023, Aug. 7, 2024
- U.S. Not-For-Profit Health Care Outstanding Ratings And Outlooks As Of June 30, 2024, July 18, 2024
- Preliminary 2023 Medians For U.S. Acute Health Care Providers Indicate Continued Operating Pressures For Many, April 30, 2024
- U.S. Not-For-Profit Acute Health Care Rating Actions, 2023 Year-End Review, Feb. 8, 2024
- U.S. Not-For-Profit Acute Health Care Providers 2024 Outlook: Historical Peak Of Negative Outlooks Signals Ongoing Challenges, Dec. 6, 2023
Glossary
- Glossary: Not-For-Profit Health Care Organization Ratios, March 19, 2018
Quarterly rating actions
- U.S. Not-For-Profit Health Care Rating Actions, June And Second Quarter 2024, July 12, 2024
- U.S. Not-For-Profit Health Care Rating Actions, March 2024, April 15, 2024
This report does not constitute a rating action.
| Primary Credit Analysts: | Marc Bertrand, Chicago + 1 (312) 233 7116; marc.bertrand@spglobal.com |
| Cynthia S Keller, Augusta + 1 (212) 438 2035; cynthia.keller@spglobal.com | |
| Secondary Contacts: | Stephen Infranco, New York + 1 (212) 438 2025; stephen.infranco@spglobal.com |
| Suzie R Desai, Chicago + 1 (312) 233 7046; suzie.desai@spglobal.com | |
| Research Contributors: | Shrutika Joshi, CRISIL Global Analytical Center, an S&P affiliate, Mumbai |
| Akul Patel, CRISIL Global Analytical Center, an S&P affiliate, Mumbai | |
| Kunal Salunke, CRISIL Global Analytical Center, an S&P affiliate, Mumbai | |
| Additional Contact: | Chloe A Pickett, Englewood + 1 (303) 721 4122; Chloe.Pickett@spglobal.com |
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