The whitepaper, titled “Financing Options for Large Non-Profit Hospitals and Multi-Hospital Systems,” broke down several areas of hospital financing. In one section, Lancaster Pollard associates laid out S&P median ratios of hospitals rated BBB and showed how they varied based on hospital type.
For example, larger hospital systems rated BBB — medium-grade but still worthy of investment — generally have lower profitability ratios than standalone hospitals rated BBB because hospital systems have higher expectations for their credit profiles. In addition, most hospital systems rated by S&P have credit ratings of A- or higher, meaning a BBB hospital system is a lower-tiered credit. Conversely, very few standalone and small hospitals have high ratings due to their smaller size and lack of access to capital, and a BBB rating is more common and acceptable for those types of organizations.
Here are 27 statistics from the whitepaper on median hospital ratios from S&P’s 2010 report, which reflect 2009 financial performance.
Hospital system medians (BBB)
Operating margin: -0.6 percent
Excess margin: -1.3 percent
Days cash on hand: 94
Cushion ratio: 9.0
Cash-to-debt ratio: 88.8 percent
Historical debt service coverage ratio: 1.4
Maximum annual debt service/revenues: 2.9
Debt-to-capitalization ratio: 65.9 percent
Average age of plant: 15.5 years
Standalone hospital medians (BBB)
Operating margin: 2.3 percent
Excess margin: 2.3 percent
Days cash on hand: 125.1
Cushion ratio: 9.5
Cash-to-debt ratio: 88.2 percent
Historical debt service coverage ratio: 3.0
Maximum annual debt service/revenues: 3.4
Debt-to-capitalization ratio: 43.1 percent
Average age of plant: 10.3 years
Small hospital medians (BBB)
Operating margin: 3.3 percent
Excess margin: 4 percent
Days cash on hand: 176
Cushion ratio: 12
Cash-to-debt ratio: 115.2 percent
Historical debt service coverage ratio: 3.1
Maximum annual debt service/revenues: 3.9
Debt-to-capitalization ratio: 37.7 percent
Average age of plant: 7.8 years
More Articles on Hospital Financial Metrics:
5 Key Financial Ratios Healthcare Providers Should Track
25 Hospitals With the Highest Average Medicare Spending Per Patient
58 Statistics on FY 2011 Median Hospital Financial Metrics
At the Becker's 11th Annual IT + Revenue Cycle Conference: The Future of AI & Digital Health, taking place September 14–17 in Chicago, healthcare executives and digital leaders from across the country will come together to explore how AI, interoperability, cybersecurity, and revenue cycle innovation are transforming care delivery, strengthening financial performance, and driving the next era of digital health. Apply for complimentary registration now.
