Fitch Ratings said operating margins improved in 2009 for not-for-profit hospitals and health systems, regardless of overall credit strength. The median operating margin was 2.8% among the 244 not-for-profit hospitals and systems included in the ratings agency's yearly report on key financial measures, up from 2.2% the prior year and 2.6% in 2007.
Not-for-profits see operating margins rise: Fitch
Fitch also noted a key capital spending ratio declined 18% in 2009 and said the two trends—improved operations and tighter capital spending—helped boost cash reserves along with investment gains. The number of days that reserves could fund operations climbed to 166.8 days from 151.6 days the prior year.
The hospitals and systems' operating gains were as a result of cost cutting, collecting more from patients, reduced bad debt and lower interest rate costs.
The rating agency said operating income before subtracting capital costs rebounded as well, but it questioned how long such performance could last. “Whether such improvements can be sustained as the sector moves towards a more restrictive reimbursement environment remains to be seen,” the Fitch report said, “but, thus far, the sector has demonstrated a surprising ability to maintain operating profitability, especially with many hospitals experiencing declining volumes and rising uncompensated care.” The ratings agency said it continues to consider the sector's outlook negative.
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