The credit rating agency said that 2020 median operating margins increased to 2.3 percent in 2020, up from 2.1 percent the year prior. In addition, the median operating earnings before interest, taxes, and amortization margins increased to 8.7 percent, up from 8.6 percent the prior year.
Median operating profitability also improved for the second year in a row, and days cash on hand increased by about five days, from 214.9 in 2019 to 219.8 in 2020.
However, Fitch warned that the improvements in financial metrics do not address the pandemic’s effect on hospitals, and the first signs will likely emerge in Fitch’s 2021 medians update.
“Health organizations will be trying to adapt to a new normal in moving further away from traditional fee-for-service reimbursement due to their experience during the coronavirus pandemic, which results in no services and no fees,” said Fitch Senior Director Kevin Holloran. “The pandemic is already resulting in increased expenses, initially significantly lower revenues and significant questions about the path forward for the remainder of the year.”
Capital spending will likely be cut after the pandemic, as providers scrutinize every dollar spent, Mr. Holloran said.
“However, we expect that providers who emerge from the pandemic as strong as they are now or stronger will ultimately accelerate spending in anticipated merger, acquisition and expansion activity,” Mr Holloran said.
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