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
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