Nonprofit hospital margins to remain weak through Q2, Fitch says

Nonprofit hospital margins will continue to struggle through the second quarter of 2022 following the operational challenges from the omicron variant, Fitch Ratings said in a May 12 report.

Four things to know:

1. COVID-19 is moving into the "endemic phase" as surges continue to pressure nonprofit hospitals' bottom lines, Fitch said. Surgical and specialty care volumes have not recovered to pre-pandemic levels. Some experts anticipate a new variant will create another surge as hospitalizations start to rise in some parts of the country.

2. Expenses from supply chain issues, inflation and labor will remain high, Fitch predicts. Labor expenses are usually above 50 percent of nonprofit hospitals' total expenses, and wages and salaries rose 1.6 percent in the first quarter of 2022 as nonprofit hospitals dealt with major workforce shortages.

3. Hospitals need to stay flexible when it comes to balancing COVID-19 care and nonemergency procedures, Fitch said. Margins will likely fall without effective cost-cutting, especially without federal financial support.

4. Nonprofit hospital sector ratings are still stable, as most organizations have healthy balance sheets, Fitch said. In the last six months, Fitch upgraded four hospital ratings and downgraded none.

Read more here.

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