S&P: Outlook is stable for nonprofit hospitals

S&P Global Ratings affirmed its stable outlook on the U.S. nonprofit healthcare sector for 2018.

"Our view is based on the overall strength of balance sheets in the sector —which are at, or close to, historical highs — combined with a long-term trend of market consolidation, physician integration, and expanded ambulatory presence, which has improved the business positions and future prospects for many rated organizations," said S&P Global Ratings credit analyst Martin Arrick.

Although S&P expects most of its rated nonprofit hospitals and health systems to maintain credit quality in 2018 due to balance sheet and business profile strengths, the rating agency believes operating risks for some nonprofit healthcare organizations will intensify. Changes in the municipal bond market that will make providers' cost of capital higher and recent legislation to eliminate the ACA's individual mandate will likely put financial pressure on hospitals and health systems, according to S&P.

"We expect rating affirmations will continue to dominate all other rating actions, which is demonstrated by the growth in stable outlooks to 82 percent from 80 percent in [2017]," according to S&P. "However, downgrades — which exceeded upgrades in 2017 for the first time since 2014 — are expected to grow in 2018 for organizations already under pressure."

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