Grants from the Coronavirus Aid, Relief and Economic Security Act are not likely to affect hospital and health system's credit ratings, Fitch Ratings said.
While the grants help offset lost revenue, they are nonrecurring in nature and will not influence long-term cash flow, which means the funding will not be a driver of credit rating changes, Fitch said.
Due to the nonrecurring nature, Fitch's 2020 forecasts for revenue and earnings before taxes, depreciation and amortization will exclude CARES Act grants.
The credit rating industry will, however, include the grants' effect on financial flexibility by including amounts in its calculation of free cash flow, which will "result in lumpiness in our 2020 and 2021 FCF forecasts," Fitch stated.
"We will revisit our approach to the treatment of CARES Act grants if hospitals receive more government funding," Fitch said. "Congressional approvals of additional fiscal stimulus is possible, given hospitals in states with a high number of infected patients continue to experience disruption related to elective procedures and as 2020 is an election year."