The credit rating agency predicts hospitals in 2010 will reallocate their investment portfolios to provide capital stability and growth and build cash reserves.
The credit rating agency reported that in 2008:
- Hospitals were structuring their investments to be more liquid. The average allocation in cash and short-term investments rose from 32 percent in 2004 to 40 percent in 2008.
- Hospitals increased cash reserves to bolster the number of days of cash on hand, which was down substantially to 110 days, a five-year low.
- To minimize risk, investment allocations were shifted slightly from common equity holdings to mutual funds.
- The ratio of unrestricted cash and investments to long-term debt saw a sizable drop while cash flow to total debt ratio reached a five-year low.
- Median 2008 operating margins declined to 0.5 percent, compared with 1.7 percent in 2005.
Read A.M. Best’s release on hospital investment portfolios.
