Fitch Ratings has released the attached draft detailing the criteria and proposed enhancements for rating U.S. not-for-profit hospitals and health systems, which also applies to tax-supported hospital districts. Fitch considers the proposed revisions largely a reframing of current criteria rather than a major change in approach, as the analytical focus on revenue and cost drivers related to balance sheet strength is largely unchanged.

The key proposed enhancements to the evaluation of not-for-profit hospitals and health systems are:

• Publication of category-specific assessments for each key rating factor
• Explicit alignment of financial profile with business profile in assessing the rating
• Explicit forward-looking consideration of the impact of existing or needed capital investments that may increase financial leverage
• Introduction of issuer-specific scenario analysis, including investment portfolio stress linked to a provider’s asset allocation, and stress on revenue and cost growth rates

Fitch invites feedback — due by Oct. 20 — on the proposed criteria. CHA will work with not-for-profit hospitals to determine whether comments are necessary.