Hospital operating margins were flat for the third year in a row in 2002, while liquidity declined and capital needs increased, according to Fitch Ratings, which plans to release a report this week on median financial indicators at its 208 rated hospitals and healthcare systems. The median operating margin in 2002 was 1.5%, the same as in 2001. Median debt service coverage, at 2.7 times, was the lowest since 1994. Poor returns in the financial markets contributed to the decline. On the positive side, revenue cycle improvements have reduced the time it takes hospitals to collect bills, Fitch said. The company expects 2003 operating margins to be hurt by smaller rate increases from managed care and higher charity-care expenses; however, that will be offset by better investment returns. Hospital borrowing, which was up 8.7% for the first six months of 2003, will continue to increase due to low interest rates and capital needs, Fitch said. -- by Mary Chris Jaklevic
Hospital operating margins holding at 1.5%: Fitch
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