Fitch: Hospital credit downgrades outpace upgrades in Q3

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As of the end of the third quarter, 88.5 percent of the nonprofit hospital and health system sector had stable rating outlooks, while 6.5 percent had positive rating outlooks and 4.2 percent had negative rating outlooks, an Oct. 11 Fitch Ratings report showed.

Fitch upgraded six hospital ratings and downgraded seven in the third quarter.

Key balance sheet metrics are at their strongest levels, which is expected to offset challenges with higher pricing for staffing and supplies and the surge from the delta coronavirus variant. But stronger margins are still uncommon because of natural year-over-year inflation surpassing natural year-over-year growth for many.

Fitch does not expect significant lockdowns through the end of 2021, nor does it expect additional federal aid to be sent to the sector.

It does, however, expect a surge in mergers and acquisitions once the pandemic is over, making wider credit gaps more common.

Revenue was expected to recover toward the end of the year, but the delta variant changed that. The financial impact was tied to the slowing of elective procedures and rapid COVID-19 mitigation efforts.

Staff shortages will be an ongoing problem and will create more expenses.

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