Fiscal Year 2024 Hospital Sector Report Summary
At the Board of Directors Meeting held on June 18th, Staff presented a review of CHEFA’s Hospital Sector portfolio, which consists of 34 bond series totaling approximately $3.11 billion for 12 issuing entities. The report focused on FY 2024 operating results, key liquidity metrics and utilization data. The report also included an update on mergers and acquisitions, as well as Moody’s credit outlook for the sector on a national basis.
CT Hospital Mergers and Acquisitions: In May 2025, Nuvance Health officially became affiliated with Northwell Health (NY’s largest healthcare provider with 21 hospitals).
Utilization: FY 2024 utilization trends within CHEFA’s portfolio yielded mostly favorable results as total discharges, patient days, ambulatory surgeries and emergency room visits are all at their highest levels over the past five years but continue to lag pre-pandemic levels within some areas.
Operating Performance: FY 2024 operating results were more favorable compared to FY 2023 with an improved operating margin median (from -1.4% to 0.3%) and operating cash flow margin median (from 3.8% to 4.2%) as median revenue growth (at 6.1%) outpaced expense growth (at 5.5%). However operating results significantly lag those achieved in FY 2021 with four of the eleven Institutions experiencing a negative operating margin in FY 2024, (averaging -5.3%), compared to only one Institution for FY 2021 at -2.3%. The FY 2024 debt service coverage ratio median of 3.1 times remained consistent from the prior year but declined from 4.2 times five years ago.
Liquidity: The FY 2024 days cash on hand median of 153.4 days improved slightly following two years of decline but lags its high of 193.5 days in FY 2021. The range varied among the hospitals (from 14 days to 306 days) and only two institutions had more than a six-month cushion. The cash-to-debt median increased from 125.1% in FY 2023 to 153.4% in FY 2024 following a three-year decline and is at its second highest level over the past five years.
Capital Investment: Total aggregate capital spending increased 15.3% from FY 2023 to FY 2024 and is at its highest level over the past five years. A substantial disproportion in capital spending exists among the hospitals based on the size and financial strength of the entities with 3 of the health systems accounting for roughly 68% of the total spending in FY 2024. Average age of plant increased marginally from the prior year and remains high at 14.1 years compared to Moody’s overall median of 12.8 years.
Credit Outlook: Four of the eight remaining stand-alone hospitals and all four in-state and multi-state health systems in the portfolio maintain an underlying credit rating with one or more of the rating agencies. Moody’s outlook for the not-for-profit and public healthcare sector for 2025 (issued on Nov 13, 2024) reflects sector stability as profitability rises modestly on revenue growth. However, rising costs and disruptions related to Medicare reimbursement lagging inflation and regulatory scrutiny of healthcare costs and mergers will slow progress.
To learn more about CHEFA’s Hospital Sector report for FY 2024 and the performance of the 24 hospitals that make up our portfolio, please contact Krista Johnson, Senior Credit and Compliance Specialist at kjohnson@chefa.com.
