Improved medians prep nonprofit children's hospitals for inflation

U.S. nonprofit children's hospitals staged a rebound after the COVID-19 pandemic and now brace for a different challenge, according to an Oct. 11 report from Fitch Ratings.

Median financial metrics for 2022 showed a 31 percent increase in cash to adjusted debt to 325 percent for the 23 children's hospitals reviewed in the report. However, according to Fitch's managing director, Richard Park, labor will significantly impede the sector. 

"Children's hospitals have not been immune to the staffing shortages pressuring the overall healthcare industry. That said, children's hospitals generally experience lower turnover levels and have more balance sheet and margin flexibility to recruit and retain staff," Mr. Park said. 

According to the report, children's hospitals have a higher median rating than adult providers, demonstrating the subsector’s robust liquidity, solid operating profitability, unique market positions, strong philanthropic support, and highly specialized clinical services. Regardless, labor shortages are expected to continue into 2023, with high-growth markets better managing some labor issues. 

"The pandemic has exposed the sector's need for additional investment and better care models for behavioral health. The potential end of the COVID-19 public health emergency declaration will likely lead to significant Medicaid disenrollments, which along with an increasing likelihood of recession further muddies what is already an unpredictable post-pandemic future," said Mr. Park.

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