S&P said the outlook reflects “continued balance-sheet strength, a long-term trend of improving business profiles mostly from mergers and acquisitions and a growing array of diversifying joint ventures.”
The rating agency said there are also recent indications that nonprofit hospitals’ operating margins are stabilizing or improving, although there are exceptions.
Additionally, there was generally an even level of rating upgrades and downgrades from S&P in 2018, which supported the stable outlook, according to S&P.
Although S&P said the outlook for nonprofit hospitals remains stable, the agency believes there are still looming risks to this stability, including a potential recession, continued Medicaid changes, and increased cost and revenue pressure.
“We also expect federal administrative changes to the ACA to continue affecting the industry. The potential ramifications of a recent court ruling that the ACA is unconstitutional could be severe if upheld, although, in our view, this threat would likely be a factor in 2020 or later,” said S&P.
The rating agency said it expects that nonprofit hospitals with lower credit ratings “could face additional stress, because some of the benefits around improved business position, balance-sheet strength, and operating performance are less amplified among them.”
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