Rating upgrades and downgrades for hospitals and health systems were nearly even across the three major credit rating agencies in 2025, according to a Jan. 21 Kaufman Hall report.
Seven things to know:
1. When combining the rating actions of Fitch, Moody’s and S&P, there were 75 downgrades and 73 upgrades in 2025, according to the report.
2. The number of downgrades fell from 95 in 2024 to 75, while the number of upgrades jumped from 37 in 2024 to 73.
3. Rating upgrades occurred across the country as organizations posted stronger financial performance and debt service coverage, reduced leverage through improved cash-to-debt and debt-to-cash-flow metrics, and saw gains in both absolute and relative liquidity, according to the report.
4. Upgrades occurred across all rating categories, including some that returned to investment grade, as agencies viewed the improved performance as sustainable.
5. M&A activity also contributed to rating upgrades in 2025, according to the report. Some hospitals involved in mergers saw their ratings raised twice during the year — first at the time of the transaction and again after outstanding debt was incorporated into the higher-rated system’s legal borrowing pledge. Many of the merger-related upgrades were multi-notch increases.
6. Rating downgrades primarily reflected weaker financial performance, lower debt service coverage and declining liquidity, according to the report. There was some concentration of downgrades in New York, Pennsylvania, Ohio and California. In other cases, hospitals were downgraded primarily due to large debt issuances that strained rating capacity.
7. Most rating actions in 2025 were affirmations and Kaufman Hall expects that trend to continue in 2026. The firm noted that reimbursement changes from the One Big Beautiful Bill do not begin in earnest until 2027 and 2028, “giving hospitals a runway to build liquidity through better financial performance and investment gains.”
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