Standard & Poor's said the recession and credit market upheaval strained not-for-profit health system balance sheets in fiscal 2008 and further deterioration is expected. The median operating margin fell or remained flat regardless of credit strength among 134 health systems rated by Standard & Poor's; overall the median operating margin in 2008 was 2.4% compared with 2.8% the prior year.
Net margins, which include investment income, tumbled across every rating category. The median net margin plunged to 2.5% in 2008 from 6.3% in 2007. Cash reserves also ebbed as investment markets tumbled and health systems used savings to pay for capital projects; cover rising pension costs; and post collateral on interest-rate hedges known as swaps, Standard & Poor's said. The median number of days systems could operate on cash reserves fell to 154 days in 2008 from 181 days the prior year. Health system rating downgrades doubled in 2008 to 18 and Standard & Poor's lowered the outlook for 27 systems, up from 14 such negative actions the prior year, the report said.
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