Hospitals are turning to the municipal bond market at a significantly higher rate than they did a year ago as they target a shift from "survival to revival," Bloomberg reported Jan. 12.
Five things to know:
1. As of Jan. 12, hospitals have borrowed more than $1.7 billion to expand and upgrade facilities, up from $390.7 million over the same period last year.
2. It is currently cheaper to tap the municipal bond market as the yield on the 10-year AAA benchmark is down 127 basis points since Nov. 1.
3. Financial pressures on hospitals are easing. Staffing costs have steadied and operating margins are improving.
4. Lisa Washburn, managing director at Municipal Market Analytics, said she classifies the hospital sector as "recovering." She told the publication there is "a pent-up need to issue debt" for technology, including cybersecurity, in addition to facilities.
5. Fitch Ratings Senior Director Kevin Hollaran said labor challenges will continue to affect hospitals and delay recovery, however. He said he expects downgrades to continue to outpace upgrades and is also concerned about a second year of debt-service covenant violations that could spur some creditors to declare defaults or accelerate repayments.
Read the full report here.