Not-for-profit hospitals financially stable in '07, says Moody's

Though some big threats continue to loom, things weren't too bad for not-for-profit hospitals in 2007, despite the subprime mortgage-fueled financial markets meltdown, ongoing problems in the U.S. economy and continuous pressure on margins, according to financial industry ratings firm Moody's Investors Service. After reviewing audited fiscal 2007 financial statements for 410 non-profits, the firm concluded that operating performance and liquidity remained stable for non-profits last year. A total of 77 percent of Moody's rated not-for-profit hospitals and health systems reported operating profits, too. This is a bit of a turnaround from a report issued by Moody's just a few months ago which, as we read it, was rather pessimistic even about non-profits' near-term health.

That being said, fiscal '07 was the second consecutive year in which the median expense growth rate exceeded the median revenue growth rate. Worse, median expenses exceeded revenues despite the fact that expenses fell to 7.4 percent for fiscal '07, down from 7.8 percent in fiscal '06. Meanwhile, margins softened, though they were still decent compared with historical levels, Moody's noted. Median operating margins hit 2.1 percent in 2007, down from 2.3 percent in 2006. Median operating cash flow dropped too, to 9 percent from 9.2 percent. Despite these pressures, median capital spending ratios--additions to capital equipment and other properties divided by depreciation--climbed to 1.52 times, up from 1.45 times the previous year.

To learn more about Moody's report:
- read this Modern Healthcare piece (reg. req.)

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