Hospital rating activity in early 2026 reflects growing stabilization following several years of elevated downgrade pressure. Rating agencies report improving balance between individual credit upgrades and downgrades, supported by balance sheet strength and increasing proactive preparation for upcoming policy changes. Rating agencies maintain stable or neutral outlooks, reflecting near-term resilience despite longer-term uncertainty.
Kaufman Hall’s 2026 Spring Rating Agency Update provided the latest insights into industry outlooks. Our panelists included Suzie Desai, Managing Director, S&P Global Ratings; Mark Pascaris, Senior Director and Analytic Lead, Fitch Ratings; and Dan Steingart, Associate Managing Director, Moody’s Ratings. Here are five key takeaways from our conversation with them.
Five key takeaways:
- Rating activity continues to stabilize
Early 2026 rating activity suggests a continued narrowing between downgrades and upgrades. S&P reported five downgrades versus two upgrades through the first quarter, compared to a wider gap in the prior year. Fitch similarly noted a near one-to-one balance and expects this trend to continue. Outlook revisions are also improving, with favorable and unfavorable outlook changes approaching parity. Despite anticipated future headwinds, the trajectory points toward stabilization for the year ahead. - Financial performance improvements are driven by execution
Improved performance across many systems reflects a combination of sustained patient volumes, labor management (especially post-pandemic), and a stronger focus on operational discipline. While supplemental funding and investment income have also supported results, agencies continue to emphasize that long-term credit strength includes both core operating performance and non-operating gains. - Balance sheets remain critical to credit stability
Balance sheet strength and flexibility continue to underpin credit stability. Agencies noted that balance sheets have largely held up, reinforcing their role as a buffer against policy uncertainty, capital needs, and potential operating volatility. - Policy uncertainty is reshaping strategy
Rating agencies see that hospitals are preparing for the future, anticipating lower reimbursement flexibility, likely site neutrality, and more cost-sensitive care models ahead. Hospitals are being proactive, accelerating margin improvement efforts, improving efficiency, and planning with long-term financial scenarios. Rating agencies note that while projections are reviewed, they place greater emphasis on how credits plan to close potential gaps. - Capital spending rebounds as hospitals invest for long-term sustainability
After several years of deferred investment, capital spending is increasing in 2026, reflecting a more disciplined, strategy-driven approach that aligns investment decisions with long-term financial sustainability. Systems are prioritizing expansion and strategic growth projects based on margin scenarios, with flexibility to scale back if performance softens.
Bottom line
This year is off to a more stable, neutral start, supported by proactive planning and resilient balance sheets. Rating agencies report that hospitals are preparing for the delayed impact of reimbursement changes from H.R.1. Hospitals are using the current window before policy changes fully take hold to strengthen margins, refine strategy, and build balance sheet flexibility. Rating agencies signal measured optimism for the rest of 2026 and remain focused on how effectively organizations prepare for a more constrained reimbursement environment ahead.
Additional considerations
- Site neutrality and care delivery shifts: Hospitals are increasingly aware that future reimbursement models will require lower-cost care settings.
- Artificial intelligence: Rating agencies consider AI a longer-term efficiency opportunity rather than a measurable driver of financial performance.
- Cybersecurity: Digital and operational resiliency continue to be important considerations for rating agencies.
