S&P changes nonprofit hospital outlook to negative

Nonprofit hospitals' outlook dropped from stable to negative due to the increasing threat of the COVID-19 pandemic, according to S&P Global Ratings.

The agency said the outbreak has caused investment deterioration, which it expects to burden credit quality. S&P Global also anticipates the pandemic will have the following effects on nonprofit hospitals: increase operating costs, reduce volume and revenues, put greater reliance on working capital lines of credit, and decrease unrestricted reserves and nonoperating revenue.

"These added constraints are coming at a time when organizations were already under some revenue and expense pressure related to industry dynamics and balance sheet strength had been a stabilizing factor," S&P Global Ratings credit analyst Suzie Desai said. "We believe certain credits, especially those with healthy unrestricted reserves and liquidity, may be better able to manage through this crisis. But duration, location, and severity will be important considerations in determining the broader impact of this pandemic on the sector."

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