While other municipal sectors have seen bond issuance increasing, healthcare volumes are down 57 percent year-to-date, according to a report by HFA Partners.
Here are eight things to know:
1. During the first half of 2018, hospitals sold just under $6 billion of tax-exempt, fixed-rate revenue bonds, down 57 percent from the $14 billion sold in the first half of 2016.
2. So far, healthcare debt issuance is lagging in comparison to other municipal sectors.
3. HFA Partners says much of the lag is a result of a rush to the market in December 2017, when hospitals sold bonds at twice the rate of other sectors. This rush was a result of borrowers going to the market ahead of schedule before advance refundings went away.
4. Another reason the healthcare sector isn't keeping pace is because of legislative uncertainty. The political unpredictability caused many hospitals to postpone capital projects until the future becomes clearer.
5. A third reason could be the heightened pressure on provider's margins, which are at the lowest levels in the last decade.
6. A fourth reason could be the transition to value-based care, which is forcing patients into the outpatient setting and causing providers to focus on innovative technology to reduce admissions. This trend is causing hospitals to forgo large facility replacements in favor of investing in IT infrastructure.
7. "Once hospitals catch up with the volumes lost to last December's issuance frenzy, we expect the pace will pick up — in spite of the more permanent trends just discussed," the report reads.
8. This lower-issuance trend makes for a favorable borrowing environment, according to HFA Partners. "Tax-exempt benchmark rates are below 3 percent, and credit spreads remain at historical lows. For most hospitals, this adds up to attractive low rates combined with flexible terms."