Fitch Ratings: Hospital credit outlook improves amid stabilizing margins

Editor's Note

The credit outlook for the nonprofit hospital sector improved from “deteriorating” to “neutral” in Fitch Ratings’ 2025 report, the first revision in more than 2 years. Healthcare Dive reported the news December 11. 

According to the outlet, Fitch attributes the shift to “steady improvement” in hospital operating margins, citing labor expense growth, improved cash flows, and stronger equity returns. Median operating margins for nonprofit hospitals are projected to rise to 1%-2% in 2025, a modest recovery from the 2023 fiscal year’s 0.8% median but still below the 2019 pre-pandemic level of 2.3%. 

Recovery across the sector is not uniform, Healthcare Dive reports. Fitch predicts a “trifurcated” landscape: 20% of providers may see credit rating upgrades, 65% are expected to maintain their ratings, and 15% could experience downgrades. Organizations with resources to invest in AI and IT infrastructure are better positioned for sustained improvement, while those struggling to manage drug expenses, payer mix shifts, and competition face greater financial strain.

According to the article, potential healthcare policy changes under President-elect Donald Trump could disrupt progress. Medicaid cuts or other policy shifts could reduce healthcare coverage for millions and negatively impact hospital margins.