Muni Hospital Bondholders Seen Facing Downgrades, Covenant Busts

US non-profit hospitals, hit hard by higher labor and supply costs, may soon see their cash flow weaken enough to violate their bond borrowing agreements, or at least trigger credit ratings downgrades, according to two recent reports.

Cuts to credit ratings or outlooks are “likely to pick up in the near-to-medium term,” and won’t be limited to smaller or rural systems, Municipal Market Analytics, a research firm, wrote this week.

Fitch Ratings said last month that it could take a median of two years before staffing returns to normal after the Covid-19 pandemic. Healthcare job openings are still high as ...