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The 2025 scorecard
Kaufman Hall’s annual review of rating activity, published Jan. 21, counted 75 downgrades across Moody’s, S&P and Fitch in 2025, down from 95 the year before. Upgrades nearly doubled to 73 from 37. Most actions were affirmations. By agency, the ratio of downgrades to upgrades fell to 1.4 to 1 at S&P from 4.5 to 1, to 1.1 to 1 at Fitch from 1.5 to 1, and at Moody’s flipped to 0.6 to 1, meaning more upgrades than downgrades.
Upgrades reflected better operating results, stronger debt service coverage, lower leverage and improved liquidity, and they reached every rating category. Some organizations moved back to investment grade. Mergers also produced upgrades, some of them multi-notch, when a weaker hospital’s debt moved under a stronger system’s credit. Agencies treated upgrades driven by higher supplemental funding with more caution.
Where the stress remains
Downgrades still came from weaker margins, thinner coverage and falling cash, with some concentration in New York, Pennsylvania, Ohio and California. A few followed large debt issues. Multi-notch downgrades of two to five notches occurred less often than in prior years, but Kaufman Hall expects them to continue in 2026. The overall distribution of hospital ratings remains lower than before the pandemic, and lower-rated organizations are increasingly seeking stronger partners.
The outlook is calm for now: stable at Moody’s and S&P, neutral at Fitch. Kaufman Hall’s flash report data show an adjusted operating margin of about 2% through November 2025. Most reimbursement changes from last year’s reconciliation law do not take effect until 2027 and 2028.
What boards should do with the window
- Prioritize days cash on hand. Liquidity built in 2026 is the main cushion against Medicaid and marketplace coverage losses later. Treat it as a target, not a residual.
- Be deliberate about new debt. Large issuances drew downgrades last year. Size capital plans against coverage ratios under a downside payer scenario.
- Watch supplemental payment dependence. If margins rest on supplemental funding such as state directed payments, assume agencies will discount them and plan accordingly.
- Talk to the agencies early. Share the multi-year plan for absorbing 2027 policy changes before annual reviews, not after results slip.
Archive entry for Jan 29, 2026, added Nov. 11, 2026.