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The nonprofit hospital sector experienced stabilization in credit rating activity during 2025, following several consecutive years in which downgrades outpaced upgrades, according to a review of rating actions from the three major credit rating agencies published this week. The review analyzed rating decisions issued by Moody’s, S&P Global Ratings, and Fitch Ratings and examined how nonprofit hospital borrowers were affected over the course of the year.
During 2025, the three agencies collectively downgraded 75 nonprofit hospital borrowers. This figure marked a decline from the 95 downgrades recorded in 2024 and the 116 downgrades reported in 2023. In contrast, the number of rating upgrades increased significantly. A total of 73 nonprofit borrowers received upgrades in 2025, compared with 37 upgrades in the prior year and 33 upgrades in 2023. The higher volume of upgrades represented a notable change when compared with recent years.
The review found that rating upgrades occurred across much of the country, while downgrades were more concentrated in certain states. According to Kaufman Hall Managing Director Lisa Goldstein, downgrades showed some concentration in New York, Pennsylvania, Ohio, and California. She also noted that ratings changes occurred across a wide range of hospital and health system characteristics rather than being limited to a single category of organization.
Goldstein wrote that most nonprofit hospital ratings remained unchanged during the year. She stated that “the overwhelming majority of ratings were affirmed, providing support for the rating agencies’ stable (Moody’s and S&P) and neutral (Fitch) outlooks for 2026.” Kaufman Hall expects this pattern of rating affirmations to continue into 2026, based on its national monitoring of hospital operations as well as the delayed reimbursement changes associated with H.R. 1.
According to the review, the increase in rating upgrades reflected, in large part, improvements in hospitals’ financial performance. These improvements included changes related to debt burdens and levels of available cash. The review also noted that many hospitals benefited from increased supplemental funding, although the rating agencies expressed concern regarding hospitals’ reliance on this funding as a source of cash flow. In addition, some hospitals experienced improved results as earlier integration and growth strategies began to take effect.
Hospitals that benefited from mergers were also among those that received upgrades. Goldstein noted that, in some cases, transactions resulted in two separate rating upgrades during the same calendar year. These occurred once at the time of closing and again when outstanding debt was incorporated under the higher-rated system’s borrowing pledge. In other instances, hospitals received rating upgrades that spanned multiple levels.
The downgrades issued during 2025 were largely associated with weakened financial performance, reduced debt service coverage, and declining liquidity. The review indicated that there were fewer multi-notch downgrades than in prior years. When multi-notch downgrades did occur, they were tied to sharp declines in performance and liquidity. Goldstein wrote, “We expect multi-notch rating downgrades to continue in 2026 given hospitals’ sensitivity to volume changes, the competitive environment in most markets and an ongoing shift to government payers, which creates less price elasticity.”
The review also noted that while the majority of ratings across the credit agencies’ portfolios remain investment grade, the overall distribution has shifted downward in recent years due to macroeconomic challenges. Some of this downward shift has been moderated by hospitals with lower ratings seeking mergers with more financially stable partners. However, Goldstein wrote that a prolonged dislocation in the equity markets or a downturn in local or regional economies could further shift the rating distribution downward.
Credit Rating Upgrades Rise for Nonprofit Hospitals
In 2025, Credit Rating upgrades for nonprofit hospitals increased significantly, reflecting improved operational performance and stronger financial health. Analysts cite that higher Credit Rating scores indicate growing confidence in the fiscal management of these hospitals.
Downgrades Decline, Strengthening Credit Rating
At the same time, Credit Rating downgrades for nonprofit hospitals declined, signaling better risk management and more resilient revenue streams. This trend improves borrowing capacity and financial stability for nonprofit hospitals, reinforcing the importance of maintaining a strong Credit Rating.
Implications of Stronger Credit Rating for Hospitals
The rise in Credit Rating upgrades and decrease in downgrades demonstrates positive financial momentum for nonprofit hospitals. Improved Credit Rating allows hospitals to access capital more efficiently, invest in infrastructure, and provide better healthcare services to their communities.
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