Nonprofit hospitals made incremental financial gains in the first half of 2025, but political and economic uncertainties could mean volatility in the future, according to Fitch.
The ratings agency released its “2025 Median Ratios: Not-for Profit Hospitals and Healthcare Systems” report Aug. 5, noting median operating margins rose to 1.1% so far this year, up from 0.4% last year. Fitch cited less reliance on contract labor, higher patient volumes and a more stable labor market overall as factors in the financial improvement.
The report also noted “robust” liquidity metrics, with nonprofit hospitals reporting an average of:
- 215.1 days cash-on-hand
- cash-to-debt reaching 169.2%, compared with 163.7% reported last year
- debt-to-capitalization dropping to 30.7%
“These strengths provide a cushion as the sector prepares for future challenges, particularly the impact of the 2025 U.S. Tax and Spending Bill, which introduces significant changes to Medicaid and is expected to pressure operating performance starting in 2027,” noted report authors Kevin Holloran and Mark Pascaris, both senior directors at Fitch. “Despite recent progress, uncertainty remains high.”
Fitch expects incremental operating gains this fiscal year, but the report notes “longer-term outlooks are clouded by legislative changes, demographic shifts and persistent labor and inflationary pressures.”
Hospitals with financial strength will be in a better position to overcome any challenges in the future, and Fitch found operating EBITDA margins improved this year across all ratings categories:
- AA: 7.2%
- A: 5.9%
- BBB: 4.7%
“The sector’s financial flexibility, supported by strong balance sheets, will be crucial as organizations adapt to evolving federal healthcare policy and macro headwinds,” the report notes.
