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U.S. Not-For-Profit Health Care System Median Financial Ratios--2022

Rating And Outlook Overview

Rated health care system portfolio size remains stable.   The number of systems rated by S&P Global Ratings has held at 162, of which 156 (or 96%) are included in the 2022 medians. This stability, despite continued credit consolidation, is due to new issuers as well as stand-alone hospitals transitioning into systems per our criteria given revenue growth and added acute care facilities.

System rating distribution shifts downward, though still skewed to higher categories.   Larger and more highly rated acute care credits have not been immune from the broad sector operating pressures. Systems rated in the 'AA' category declined to 41%, after holding stable near 44% throughout the pandemic. There were concurrent increases in the 'A' and 'BBB' categories, with the median system rating remaining 'A+'. Despite this movement, the ratings for systems reflect their robust enterprise profiles characterized by greater scale and diversity, with generally sophisticated operating strategies and good depth and breadth of management teams. Speculative-grade rated systems remain rare, encompassing only five credits and therefore excluded from tables 2, 3A, 3B, and 3C.

Rating distribution for systems remains comparatively stronger than stand-alone hospitals despite certain financial metrics being weaker.   About 88% of systems are rated in the 'AA' or 'A' categories. By comparison, just 57% of stand-alone hospitals are rated in these categories, despite most financial medians being favorable to those of systems. Many notable outliers notwithstanding, we continue to observe generally lower rating volatility among the system issuers. The median stand-alone hospital rating is 'A-'.

Negative outlooks rise substantially, surpassing previous peak of 2020.   After falling steadily the previous two years, the percentage of systems that have a negative outlook more than doubled in 2023, now encompassing one-in-five rated systems. This compares with a previous high of 17% in 2020, and a pre-pandemic level of 5% in 2019. We believe it is possible this is a high point for negative outlooks given financial profiles are generally improving and a revision to stable at the current rating is possible, though some may be concurrent with a downgrade. Future rating actions will hinge on operating recovery efforts and overall credit quality. Accordingly, and given the sample's already higher median rating level, positive outlooks remain low near 2%.

Chart 1

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Chart 2

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Key Median Takeaways

The operating volatility and continued rating transitions over the past year, coupled with various uneven revenue items related to provider relief funds, FEMA grants, and state supplemental programs, present some unique limitations in the comparison of medians across health care systems and stand-alone hospitals, as well as between rating categories and the prior year. Clear conclusions or developing trends could be somewhat challenging to identify without the benefit of an additional one to two years of data. For this report, we've provided an additional view of the overall system median data with lower and upper half medians for select financial metrics to highlight dispersion of the median data and also compared that data to 2019, the last year of medians before the COVID-19 pandemic.

Top-line growth slows in 2022.   Median net patient revenue and total operating revenue both grew by about 5%, well below growth observed in 2021 given a depressed 2020, and notably lower than pre-pandemic levels consistently near 8% and relative to stand-alone hospitals. Of the many factors behind this, we view reduced provider relief funds, softer inpatient utilization, and challenges staffing existing capacity as likely contributors. Median system operating revenue is now near $3.6 billion, reflecting both the organic growth of health systems across the country as well as from mergers and acquisitions. In addition, the meaningful variance between median net patient revenue and total operating revenue for 'AA' category providers highlights revenue diversity that can come from provider-sponsored health plans, specialty pharmacy programs, and other operating activities.

Median operating performance turns negative for the first time, following peak profitability in 2021.   System operating margins declined for every rating level aside from the extremely small 'BBB/BBB-' group. The negative 0.4% median operating margin for systems in 2022 represents the largest year-over-year shift in this measure over the past decade. In addition, when coupled with challenged investment markets and limited non-operating revenue, maximum annual debt service coverage fell below 4x, which had previously been an unbroken floor. Only the 'AA+' and 'AA' rating levels generated a positive operating margin when adjusting for nonrecurring items, mostly provider relief funds, indicating further recovery headwinds remain as stimulus tapers.

Unrestricted reserves greatly tempered with investment market volatility and reduced cash flow.   After years of steady growth, key system liquidity metrics, namely days' cash on hand and unrestricted reserves to long-term debt, regressed to 2017 levels. Specifically, days' cash on hand declined 20% from peak 2021, as investment values weakened and daily cash operating expenses increased due to inflation and increased labor costs. Exemplifying the sector's exposure to broader economic and investment market trends, no rating level was immune to this decline, though 'AA' category rating levels continue to be characterized by robust reserves. Lastly, we also observed an increase in capital spending across all rating levels in the 'AA' and 'A' categories, contributing to pressured reserves as some strategic investments resumed following a period of restrained spending.

Debt profile largely stable as pension funded status improved, but incremental debt and declining unrestricted net assets pushed up leverage.   Median leverage for systems returned to above 30% in 2022 as a result of higher median debt loads, particularly at higher rating levels, and reduced net assets affected by investment market losses and weaker cash flow. Partly offsetting this shift, defined-benefit pension plans had a median funded status of 93% aided by rising discount rates. All rating levels in the 'AA' and 'A' categories had a funded status above 90%, aside from the 'A' rating level (88%). This compares with an average of 80% the previous decade. Debt structures have also de-risked with contingent debt representing just 25% of long-term debt, the lowest level since we started tracking the figure in 2014. For many systems, debt capacity at a given rating is predominantly limited by weaker cash flow and unrestricted reserves, not necessarily existing liabilities.

Other indicators align with worsened financial picture in 2022.   Various other medians were aligned with the broad weakening cited above, including reduced non-operating revenue as a percentage of total operating revenue, a reduced cushion ratio, and salaries and benefits expense as a percentage of net patient revenue regressing back above 60%. Median cash flow to total liabilities fell by 40% for systems, indicative of the incredible contrast between 2021 and 2022.

Table 1

U.S. not-for-profit health care system medians
Fiscal year 2022 2021 2020 2019 2018 2017 2016 2015 2014
Sample size 156 156 153 146 142 144 146 142 140
Financial performance
Net patient revenue ($000s) 3,054,579 2,909,293 2,587,620 2,519,213 2,397,747 2,203,429 2,022,277 1,873,321 1,718,626
Total operating revenue ($000s) 3,576,230 3,379,365 3,089,200 2,877,252 MNR MNR MNR MNR MNR
Total operating expenses ($000s) 3,619,521 3,256,661 MNR MNR MNR MNR MNR MNR MNR
Operating income ($000s) -12,022 92,146 MNR MNR MNR MNR MNR MNR MNR
Operating margin (%) -0.4 2.5 1.2 2.7 2.3 2.2 2.4 3.6 2.9
Net nonoperating income ($000s) 54,404 106,017 MNR MNR MNR MNR MNR MNR MNR
Excess income ($000s) 25,184 215,663 MNR MNR MNR MNR MNR MNR MNR
Excess margin (%) 1.2 5.5 3.2 4.3 3.9 4.5 3.7 5.3 5.1
Operating EBIDA margin (%) 4.9 7.6 6.8 8.4 8.3 8.3 9.0 10.2 9.5
EBIDA margin (%) 6.1 10.6 8.6 9.8 10.0 10.3 9.9 11.5 12.0
Net available for debt service ($000s) 216,821 399,272 279,127 303,095 282,188 265,041 223,165 278,605 247,243
Maximum annual debt service ($000s) 74,446 76,372 MNR MNR MNR MNR MNR MNR MNR
Maximum annual debt service coverage (x) 3.2 5.5 4.1 4.4 4.4 4.5 4.3 5.0 4.6
Operating lease-adjusted coverage (x) 2.4 4.0 3.1 3.4 3.2 3.5 3.1 3.4 3.4
Liquidity and financial flexibility
Unrestricted reserves ($000s) 1,845,341 2,220,248 1,961,547 1,604,728 1,484,081 1,402,672 1,213,897 1,191,485 1,086,026
Unrestricted days' cash on hand 206.9 259.3 236.7 218.3 213.3 205.5 197.6 205.5 203.1
Unrestricted reserves/total long-term debt (%) 169.5 213.2 189.3 175.6 175.1 173.3 169.5 161.0 153.4
Unrestricted reserves/contingent liabilities (%)* 845.0 884.3 794.1 645.8 594.1 546.3 507.6 462.6 451.2
Average age of plant (years) 11.9 11.6 11.1 11.0 10.6 10.8 10.6 10.5 10.4
Capital expenditures/depreciation and amortization (%) 121.9 109.4 120.0 134.4 133.3 132.3 125.1 126.0 123.8
Debt and liabilities
Total long-term debt ($000s) 1,177,660 1,126,357 MNR MNR MNR MNR MNR MNR MNR
Long-term debt/capitalization (%) 31.5 28.7 31.9 31.6 31.7 32.3 34.0 33.7 34.6
Contingent liabilities ($000s)* 314,099 294,258 MNR MNR MNR MNR MNR MNR MNR
Contingent liabilities/total long-term debt (%)* 25.0 27.1 27.0 28.7 31.8 33.2 31.9 34.4 36.7
Debt burden (%) 2.0 2.0 2.1 2.2 2.2 2.2 2.3 2.3 2.4
Defined-benefit plan funded status (%)* 93.1 91.0 79.9 81.8 84.8 81.0 74.0 78.2 82.0
Miscellaneous
Salaries and benefits/NPR (%) 60.4 58.9 62.0 58.3 57.9 57.9 57.2 56.4 57.8
Nonoperating revenue/total revenue (%) 1.5 3.1 1.9 1.9 1.7 2.1 1.1 2.0 2.6
Cushion ratio (x) 25.6 29.9 27.9 25.1 24.0 22.9 21.4 21.4 19.6
Days in accounts receivable 47.4 47.4 44.6 46.5 45.8 47.8 48.2 48.0 48.1
Cash flow/total liabilities (%) 8.8 14.9 10.1 14.9 14.3 15.3 13.9 16.2 16.9
Pension-adjusted long-term debt/capitalization (%)* 31.9 30.3 34.6 34.5 33.9 34.9 37.3 38.2 38.2
Adjusted operating margin (%)§ -1.7 0.6 MNR MNR MNR MNR MNR MNR MNR
MNR--median not reported. *These ratios are only for organizations that have defined-benefit (DB) pension plans or contingent liabilities. §Adjusted operating margin excludes nonrecurring operating revenues that are largely attributable to pandemic related relief funds recognized, but could comprise other nonrecurring items.

Table 2

U.S. not-for-profit health care system medians by rating category--2022 versus 2021 versus 2020
AA A BBB
Fiscal year 2022 2021 2020 2022 2021 2020 2022 2021 2020
Sample size 62 67 68 75 73 68 14 12 14
Financial performance
Net patient revenue ($000s) 4,658,064 3,967,396 3,656,374 2,895,797 2,785,584 2,355,251 2,392,666 2,320,623 1,848,873
Total operating revenue ($000s) 5,486,145 4,857,985 4,246,373 3,160,358 3,004,399 2,777,093 2,557,140 2,643,573 2,274,580
Total operating expenses ($000s) 5,431,141 4,629,958 MNR 3,111,593 3,079,773 MNR 2,654,551 2,617,988 MNR
Operating income ($000s) 12,779 184,961 MNR -1,848 82,000 MNR -92,820 7,288 MNR
Operating margin (%) 0.4 3.7 2.3 -0.1 1.9 1.1 -3.7 0.3 -0.9
Net nonoperating income ($000s) 101,641 200,264 MNR 52,779 76,792 MNR 13,304 59,622 MNR
Excess income ($000s) 148,921 398,348 MNR 22,001 145,488 MNR -112,101 54,324 MNR
Excess margin (%) 3.2 7.9 5.1 0.9 4.7 2.6 -3.1 2.0 0.1
Operating EBIDA margin (%) 5.6 8.6 7.8 4.9 7.3 6.8 1.0 5.3 4.5
EBIDA margin (%) 8.2 13.2 10.2 6.0 9.9 8.3 1.4 7.5 5.4
Net available for debt service ($000s) 384,887 611,708 389,264 197,317 363,308 242,866 38,697 183,038 115,755
Maximum annual debt service ($000s) 107,364 89,372 MNR 72,198 70,783 MNR 48,879 49,835 MNR
Maximum annual debt service coverage (x) 4.3 6.8 5.2 3.2 4.7 3.6 0.9 4.4 2.4
Operating lease-adjusted coverage (x) 3.2 5.0 3.8 2.3 3.6 2.8 1.0 3.2 1.8
Liquidity and financial flexibility
Unrestricted reserves ($000s) 3,803,049 4,171,453 2,960,920 1,502,579 1,685,564 1,431,682 651,105 980,645 772,840
Unrestricted days' cash on hand 263.4 326.3 295.3 179.2 214.6 187.9 104.0 122.8 146.4
Unrestricted reserves/total long-term debt (%) 261.6 297.4 267.0 143.9 171.5 153.5 114.4 133.9 126.0
Unrestricted reserves/contingent liabilities (%)* 996.5 1,036.6 861.5 590.5 613.3 611.0 780.3 911.0 1,226.5
Average age of plant (years) 11.3 10.8 10.6 12.5 12.1 11.6 13.1 13.4 12.6
Capital expenditures/depreciation and amortization (%) 129.3 120.5 127.9 119.0 108.4 118.7 94.9 105.0 92.6
Debt and liabilities
Total long-term debt ($000s) 1,673,227 1,401,720 MNR 1,058,719 1,166,358 MNR 736,175 713,346 MNR
Long-term debt/capitalization (%) 23.6 21.4 25.4 37.3 32.1 35.5 41.3 39.4 47.2
Contingent liabilities ($000s)* 442,655 401,770 MNR 292,325 293,033 MNR 114,827 141,444 MNR
Contingent liabilities/total long-term debt (%)* 27.6 30.3 30.4 22.9 26.4 25.9 16.7 21.4 11.5
Debt burden (%) 1.8 1.9 1.9 2.0 2.0 2.3 1.8 2.0 2.0
Defined-benefit plan funded status (%)* 93.5 91.7 81.9 94.7 90.2 79.4 80.9 85.5 68.8
Miscellaneous
Salaries and benefits/NPR (%) 60.2 57.6 60.8 59.7 58.3 62.3 63.7 63.8 69.0
Nonoperating revenue/total revenue (%) 1.9 4.5 2.3 1.3 2.8 1.5 0.5 1.8 1.0
Cushion ratio (x) 36.9 42.7 37.9 21.4 25.1 21.4 14.9 16.6 19.8
Days in accounts receivable 48.3 47.8 45.7 46.6 45.4 43.7 41.6 42.5 43.0
Cash flow/total liabilities (%) 13.3 20.7 14.4 8.0 13.2 9.2 0.7 9.8 4.8
Pension-adjusted long-term debt/capitalization (%)* 24.2 22.3 27.6 37.4 34.3 39.9 44.2 43.1 50.7
Adjusted operating margin (%)§ -1.0 1.6 MNR -1.4 0.1 MNR -4.8 -1.8 MNR
MNR--median not reported. *These ratios are only for organizations that have defined-benefit (DB) pension plans or contingent liabilities. §Adjusted operating margin excludes nonrecurring operating revenues that are largely attributable to pandemic related relief funds recognized, but could comprise other nonrecurring items.

Table 3A

U.S. not-for-profit health care system medians by rating level--2022 versus 2021 versus 2020
AA+ AA AA-
Fiscal year 2022 2021 2020 2022 2021 2020 2022 2021 2020
Sample size 7 7 7 22 24 23 33 36 38
Financial performance
Net patient revenue ($000s) 5,181,372 4,806,946 4,157,684 5,171,948 4,409,886 3,978,564 3,951,733 3,231,647 3,083,160
Total operating revenue ($000s) 5,411,848 5,090,381 4,425,375 5,991,229 5,319,909 4,949,023 4,883,440 3,824,089 3,411,439
Total operating expenses ($000s) 5,123,893 4,620,686 MNR 5,859,156 5,141,836 MNR 5,093,631 3,687,587 MNR
Operating income ($000s) 116,489 414,846 MNR 44,073 185,339 MNR -45,606 117,865 MNR
Operating margin (%) 1.2 6.4 4.5 1.1 4.0 3.2 -0.9 2.8 1.9
Net nonoperating income ($000s) 347,511 507,674 MNR 115,692 310,496 MNR 57,896 157,639 MNR
Excess income ($000s) 464,000 888,378 MNR 199,885 514,701 MNR 85,907 263,968 MNR
Excess margin (%) 4.6 13.1 5.5 3.8 9.8 5.8 1.2 6.8 4.1
Operating EBIDA margin (%) 8.6 12.6 11.3 6.2 9.3 8.3 5.0 8.2 7.1
EBIDA margin (%) 10.7 18.2 12.2 8.9 14.2 10.7 6.7 11.7 9.2
Net available for debt service ($000s) 988,665 1,251,308 775,782 477,778 758,893 577,381 269,413 425,353 307,000
Maximum annual debt service ($000s) 118,159 122,069 MNR 104,752 87,494 MNR 71,650 75,263 MNR
Maximum annual debt service coverage (x) 6.9 11.6 8.0 4.9 8.0 5.8 3.4 6.1 4.6
Operating lease-adjusted coverage (x) 6.1 9.0 6.3 3.7 5.4 4.8 2.8 4.4 3.3
Liquidity and financial flexibility
Unrestricted reserves ($000s) 7,346,841 8,274,533 5,550,716 5,176,366 5,428,508 4,447,015 2,980,232 2,800,238 2,654,657
Unrestricted days' cash on hand 433.3 525.1 425.0 294.1 350.8 344.9 232.8 291.9 286.7
Unrestricted reserves/total long-term debt (%) 364.6 466.6 382.5 294.7 334.9 300.7 214.2 263.6 237.3
Unrestricted reserves/contingent liabilities (%)* 1,479.7 1,579.6 1,105.8 968.1 1,036.6 880.8 927.1 893.5 837.2
Average age of plant (years) 8.8 8.7 9.1 11.3 11.3 10.8 11.4 10.8 10.4
Capital expenditures/depreciation and amortization (%) 126.6 105.0 124.6 152.7 148.9 137.6 122.3 105.4 118.3
Debt and liabilities
Total long-term debt ($000s) 2,013,223 1,896,127 MNR 1,662,468 1,425,146 MNR 1,530,000 1,015,854 MNR
Long-term debt/capitalization (%) 20.3 16.4 20.9 22.4 20.0 22.2 28.1 25.0 26.9
Contingent liabilities ($000s)* 775,553 790,133 MNR 650,624 491,170 MNR 283,360 286,172 MNR
Contingent liabilities/total long-term debt (%)* 26.4 30.3 26.5 33.3 31.3 44.7 20.9 24.9 30.4
Debt burden (%) 1.7 1.5 1.6 1.6 1.6 1.8 2.1 2.0 2.0
Defined-benefit plan funded status (%)* 94.6 93.7 82.7 91.6 90.4 81.7 93.5 94.4 82.2
Miscellaneous
Salaries and benefits/NPR (%) 57.3 54.3 55.7 60.0 59.8 61.3 60.7 57.6 60.0
Nonoperating revenue/total revenue (%) 5.8 6.5 2.9 2.6 4.3 2.3 1.5 4.0 2.0
Cushion ratio (x) 60.5 75.9 73.9 44.6 47.9 44.5 31.0 35.7 33.5
Days in accounts receivable 39.4 44.5 41.4 48.9 49.0 47.2 46.4 47.9 46.7
Cash flow/total liabilities (%) 21.0 34.0 18.9 14.1 23.2 16.9 9.0 16.7 11.8
Pension-adjusted long-term debt/capitalization (%)* 20.6 16.6 23.3 22.2 20.3 23.6 28.2 26.7 28.2
Adjusted operating margin (%)§ 1.1 5.2 MNR 0.2 2.2 MNR -1.7 1.1 MNR
MNR--median not reported. *These ratios are only for organizations that have defined-benefit (DB) pension plans or contingent liabilities. §Adjusted operating margin excludes nonrecurring operating revenues that are largely attributable to pandemic related relief funds recognized, but could comprise other nonrecurring items.

Table 3B

U.S. not-for-profit health care system medians by rating level--2022 versus 2021 versus 2020
A+ A A-
Fiscal year 2022 2021 2020 2022 2021 2020 2022 2021 2020
Sample size 29 29 26 33 32 32 13 12 10
Financial performance
Net patient revenue ($000s) 2,719,320 2,574,590 2,260,420 3,103,344 3,301,950 2,687,606 2,485,744 2,151,080 2,076,521
Total operating revenue ($000s) 3,124,358 2,998,072 2,552,547 3,561,273 3,511,073 3,065,105 2,615,198 2,525,214 2,684,250
Total operating expenses ($000s) 3,072,828 2,883,645 MNR 3,589,731 3,371,951 MNR 2,538,202 2,388,333 MNR
Operating income ($000s) 12,765 94,222 MNR -31,079 82,687 MNR 13,198 70,095 MNR
Operating margin (%) 0.4 3.8 1.6 -1.2 1.9 0.7 0.5 1.4 0.6
Net nonoperating income ($000s) 54,377 92,594 MNR 56,237 69,765 MNR 42,512 54,300 MNR
Excess income ($000s) 43,520 207,165 MNR 10,125 139,808 MNR 36,130 86,877 MNR
Excess margin (%) 1.8 5.3 3.1 0.3 4.0 2.3 0.9 4.0 2.4
Operating EBIDA margin (%) 5.5 9.0 8.1 4.0 6.9 6.6 5.7 6.6 6.7
EBIDA margin (%) 6.8 11.2 8.9 5.4 9.0 8.0 6.0 10.3 8.0
Net available for debt service ($000s) 229,407 409,123 232,016 163,305 378,589 253,176 151,926 255,243 209,691
Maximum annual debt service ($000s) 67,489 62,797 MNR 73,508 81,381 MNR 74,446 74,293 MNR
Maximum annual debt service coverage (x) 4.0 5.5 3.9 2.3 4.4 3.6 3.3 4.1 3.3
Operating lease-adjusted coverage (x) 2.6 4.2 2.8 2.0 3.3 2.8 2.1 3.0 2.6
Liquidity and financial flexibility
Unrestricted reserves ($000s) 1,546,612 1,595,093 1,323,540 1,621,747 1,834,266 1,653,752 1,295,432 1,476,126 1,287,932
Unrestricted days' cash on hand 196.6 243.9 208.1 153.6 187.8 177.6 177.0 215.8 205.8
Unrestricted reserves/total long-term debt (%) 164.5 193.8 172.9 131.3 161.1 143.6 115.1 142.6 112.6
Unrestricted reserves/contingent liabilities (%)* 712.5 943.3 675.2 542.8 605.3 580.2 586.6 509.0 456.2
Average age of plant (years) 12.4 12.0 11.6 12.2 12.1 11.6 14.1 12.6 12.0
Capital expenditures/depreciation and amortization (%) 121.7 106.2 120.0 119.1 110.7 117.3 110.0 99.3 108.3
Debt and liabilities
Total long-term debt ($000s) 958,611 817,382 MNR 1,177,660 1,353,718 MNR 1,218,340 1,204,656 MNR
Long-term debt/capitalization (%) 30.2 28.8 31.7 38.9 35.6 39.5 41.6 41.0 44.7
Contingent liabilities ($000s)* 180,050 222,398 MNR 292,325 293,033 MNR 415,810 336,250 MNR
Contingent liabilities/total long-term debt (%)* 22.9 25.1 25.5 24.2 26.2 26.4 22.8 27.2 25.2
Debt burden (%) 2.0 1.9 2.1 2.0 2.0 2.4 2.0 2.2 2.4
Defined-benefit plan funded status (%)* 96.9 92.1 82.0 88.4 84.8 73.1 96.5 93.8 85.1
Miscellaneous
Salaries & benefits/NPR (%) 58.2 56.8 58.4 64.6 61.3 63.4 57.4 57.4 68.3
Nonoperating revenue/total revenue (%) 1.1 3.1 1.5 1.6 2.2 1.7 0.7 2.5 1.5
Cushion ratio (x) 23.5 28.8 24.4 20.5 24.5 20.1 18.8 22.4 18.6
Days in accounts receivable 46.1 49.0 42.9 47.1 45.2 43.9 47.6 44.6 43.2
Cash flow/total liabilities (%) 12.0 14.9 10.0 7.5 12.3 9.0 5.8 11.1 7.5
Pension-adjusted long-term debt/capitalization (%)* 30.4 29.0 34.5 39.8 38.4 46.1 42.2 42.6 45.1
Adjusted operating margin (%)§ -0.7 0.8 MNR -3.3 -0.1 MNR -0.5 -0.6 MNR
MNR--median not reported. *These ratios are only for organizations that have defined-benefit (DB) pension plans or contingent liabilities. §Adjusted operating margin excludes nonrecurring operating revenues that are largely attributable to pandemic related relief funds recognized, but could comprise other nonrecurring items.

Table 3C

U.S. not-for-profit health care system medians by rating level--2022 versus 2021 versus 2020
BBB+ BBB/BBB-
Fiscal year 2022 2021 2020 2022 2021 2020
Sample size 10 8 10 4 4 4
Financial performance
Net patient revenue ($000s) 2,418,067 2,320,623 1,848,873 2,104,044 3,233,651 2,961,333
Total operating revenue ($000s) 2,683,873 2,643,573 2,274,580 2,274,531 4,230,599 4,112,269
Total operating expenses ($000s) 2,775,239 2,617,988 MNR 2,308,153 4,392,184 MNR
Operating income ($000s) -92,820 7,333 MNR 63,403 -127,347 MNR
Operating margin (%) -4.2 0.3 -0.2 -0.9 -1.4 -3.2
Net nonoperating income ($000s) 25,951 65,866 MNR -5,095 45,374 MNR
Excess income ($000s) -115,954 66,118 MNR -68,497 -73,023 MNR
Excess margin (%) -3.3 2.5 0.5 -2.1 -0.4 -2.0
Operating EBIDA margin (%) 0.3 5.3 5.0 4.1 3.6 1.6
EBIDA margin (%) 1.2 7.5 6.0 4.2 5.0 2.8
Net available for debt service ($000s) 30,429 219,065 115,755 112,436 116,968 150,886
Maximum annual debt service ($000s) 53,002 49,835 MNR 45,156 90,769 MNR
Maximum annual debt service coverage (x) 0.8 4.6 3.6 1.3 1.5 1.3
Operating lease-adjusted coverage (x) 0.9 3.2 2.5 1.2 1.4 1.1
Liquidity and financial flexibility
Unrestricted reserves ($000s) 651,105 980,645 772,840 744,782 1,243,773 1,292,019
Unrestricted days' cash on hand 104.5 147.5 158.8 99.0 104.3 116.7
Unrestricted reserves/total long-term debt (%) 130.8 195.6 167.9 74.1 89.6 107.2
Unrestricted reserves/contingent liabilities (%)* 573.5 911.0 2,102.2 1,305.8 837.8 816.1
Average age of plant (years) 12.6 13.4 12.8 13.6 11.5 11.8
Capital expenditures/depreciation and amortization (%) 87.9 97.7 86.8 117.2 164.4 144.9
Debt and liabilities
Total long-term debt ($000s) 784,442 615,672 MNR 622,416 1,452,435 MNR
Long-term debt/capitalization (%) 39.7 30.5 35.2 52.6 53.2 56.2
Contingent liabilities ($000s)* 95,123 110,650 MNR 134,530 290,761 MNR
Contingent liabilities/total long-term debt (%)* 24.9 26.2 10.7 5.8 14.0 13.7
Debt burden (%) 1.7 1.7 1.8 2.2 2.1 2.1
Defined-benefit plan funded status (%)* 80.9 84.2 68.8 84.2 85.5 70.6
Miscellaneous
Salaries & benefits/NPR (%) 65.8 67.2 69.6 60.4 63.1 68.8
Nonoperating revenue/total revenue (%) 0.8 2.4 1.5 -0.4 1.2 0.7
Cushion ratio (x) 15.5 21.5 24.6 9.9 13.8 15.3
Days in accounts receivable 41.6 39.0 41.6 44.6 48.7 47.6
Cash flow/total liabilities (%) 0.5 11.3 6.5 2.6 3.0 1.5
Pension-adjusted long-term debt/capitalization (%)* 41.2 35.2 41.5 55.0 52.9 59.5
Adjusted operating margin (%)§ -5.6 -0.3 MNR -2.0 -5.6 MNR
MNR--median not reported. *These ratios are only for organizations that have defined-benefit (DB) pension plans or contingent liabilities. §Adjusted operating margin excludes nonrecurring operating revenues that are largely attributable to pandemic related relief funds recognized, but could comprise other nonrecurring items.

Table 4

U.S. not-for-profit system median analysis--2022 versus 2019
2022 2019
Medians - lower half Medians - overall Medians - upper half Medians - lower half Medians - overall Medians - upper half
Select financial metrics
Operating margin (%) -2.7 -0.4 1.7 0.7 2.7 4.2
EBIDA margin (%) 3.0 6.1 9.2 7.6 9.8 12.6
Maximum annual debt service coverage (x) 1.5 3.2 4.5 3.4 4.4 6.1
Unrestricted days' cash on hand 145.9 206.9 260.0 155.5 218.3 290.6
Unrestricted reserves/total long-term debt (%) 126.4 169.5 247.0 132.8 175.6 242.9

Ratio Analysis

We view ratio analysis as an important tool in our assessment of the credit quality of not-for-profit health care organizations in addition to other key considerations including our analysis of enterprise profile factors and forward-looking views relative to both the business and financial positions. The median ratios offer a snapshot of the financial profile and help in the comparison of issuers across rating categories. Tracking median ratios over time also presents a clearer understanding of industrywide trends and provides a tool to better assess the sector's future credit quality.

The financial statements used for medians and in our analysis include both obligated and nonobligated group members. For the 2020, 2021, and 2022 medians, unrestricted reserves exclude Medicare advance payments. All recognized CARES Act funding and other pandemic related relief is included in total operating revenue.

Related Research

Glossary of our ratios

Glossary: Not-For-Profit Health Care Organization Ratios, March 19, 2018

Quarterly rating actions

This report does not constitute a rating action.

Primary Credit Analysts:Patrick Zagar, Dallas + 1 (214) 765 5883;
patrick.zagar@spglobal.com
Chloe A Pickett, Englewood + 1 (303) 721 4122;
Chloe.Pickett@spglobal.com
Secondary Contacts:Stephen Infranco, New York + 1 (212) 438 2025;
stephen.infranco@spglobal.com
Suzie R Desai, Chicago + 1 (312) 233 7046;
suzie.desai@spglobal.com
Research Contributors:Shrutika Joshi, Pune;
shrutika.joshi@spglobal.com
Akul Patel, Pune;
akul.patel@spglobal.com
Kunal Salunke, Mumbai;
kunal.salunke@spglobal.com

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