S&P: Ratios at Children's Hospitals Still Strong, But Declining

Non-profit children's hospitals traditionally have some of the highest financial metrics and ratios in the hospital sector due to high levels of philanthropy, strong investments and few, if any, competitors. However, over the past five years, their median ratios have declined to a more common industry level, according to a report from Standard & Poor's Ratings Services.

S&P rates 22 standalone children's hospitals, and all are independent and unaffiliated with any other acute-care hospital or health system. Some of the hospitals within S&P's portfolio include Lurie Children's Hospital of Chicago, Children's Hospital of Boston, Children's Hospital of Los Angeles, Children's Hospital of Philadelphia and Lucile Packard Children's Hospital in Palo Alto, Calif.

Analysts said children's hospitals still have some of the most stable finances and credit ratings, but industry pressures are increasing. For example, healthcare reform is encouraging accountable care organizations to partner with physician groups and pediatric subspecialists, which may enter children's hospitals' territory. Also, many children's hospitals rely on large amounts of Medicaid funds, which have been on the chopping block in many states, especially those that have decided against expanding Medicaid.

Overall, most children's hospitals still have high credit ratings, mostly in the "A" category. S&P compiled financial data for its higher-rated hospitals, and here are 24 of the main statistics from its report.

Children's hospitals ("A" credit rating category)

Metric

2012

2007

Net patient revenue

$530.0 million

$378.5 million

Operating margin

4.9 percent

3.4 percent

Maximum debt service coverage

4.4x

5.1x

EBIDA margin

14.9 percent

14.6 percent

Cushion ratio

20.3x

19.9x

Days cash on hand

264.2

227.7



Children's hospitals ("AA" credit rating category)


Metric

2012

2007

Net patient revenue

$921.7 million

$749.2 million

Operating margin

3.3 percent

3.5 percent

Maximum debt service coverage

5.1x

6.7x

EBIDA margin

13.4 percent

17.3 percent

Cushion ratio

32.0x

49.2x

Days cash on hand

338.4

439.1


More Articles on Children's Hospital Finances:

Boston Children's Hospital Takes Stake in For-Profit Genomics Company
Moody's: 100 Statistics on Children's Hospital Medians
How Nemours/Alfred I. duPont Hospital for Children in Delaware Systematically Improved Its ED

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