Over the past decade, rating agency meetings have changed dramatically.
Prior to the pandemic, presentations generally followed a familiar format. Meetings often began with mission and vision, followed by strategic positioning, market dynamics, and long-term financial stewardship. The tone was measured and methodical, centered on strategic execution and organizational stability.
Then came the pandemic.
Almost overnight, rating presentations became tactical and urgent. Discussions shifted immediately to financial performance, labor disruption, liquidity preservation, and covenant management. Organizations were no longer explaining long-term strategy as much as they were explaining how they intended to survive profound uncertainty.
As the industry stabilized during 2023 through 2025, presentations gradually returned to a more traditional structure. Mission, strategic direction, and market positioning once again became part of the agenda before transitioning into financial and balance sheet discussions.
Now, however, the not-for-profit hospital industry faces another inflection point.
With the passage of HR1, hospitals face future reductions in federal funding beginning largely in 2028. Unlike prior crises that emerged suddenly, this challenge comes with advance warning. The industry can now see the storm forming offshore.
That clarity should once again change the nature of rating agency conversations.
Organizations now face a fundamental question: how do you communicate confidence and preparedness while acknowledging the very real pressures ahead?
Drawing upon nearly 30 years of rating agency meetings, presentations, and calls, here is what I would want to hear if I were the analyst sitting across the table from you.
Financial performance: Tell me what makes it durable
Many hospitals are performing relatively well today. In some respects, the industry is experiencing the calm after the pandemic and before the next storm associated with HR1.
I would want a clear explanation of what makes current performance durable.
That discussion should begin with revenue strategies and payer mix trends. Organizations need to explain where they are in managed care negotiations, what changes are expected with Medicaid and supplemental funding, and how HR1 may affect reimbursement and exchange enrollment.
Equally important is the resiliency plan.
What evaluation is underway to determine which services the hospital can continue to support from both a quality and margin perspective? How is labor being managed? How are supply chain costs, pharmaceuticals, purchased services, and physician contracts being controlled?
Forward projections are critical.
What assumptions underpin the forecast? Are they conservative, realistic, or optimistic? Does the organization project steady improvement, a hockey-stick recovery, or gradual weakening performance—and why?
Balance sheet and liquidity: Explain your flexibility
The second category is the balance sheet and liquidity profile.
This discussion should focus on cash and investments, capital spending plans, debt structure, and financial flexibility.
Capital spending deserves particular attention. One of the most important metrics reviewed by rating agencies is the capital spending ratio, which compares additions to property, plant, and equipment against depreciation expense. A ratio of at least 1.0x is generally viewed as a baseline, while industry medians are now trending closer to 1.2x.
During the pandemic, many organizations deferred capital spending to preserve liquidity. That trend has now reversed.
Hospitals are once again investing in strategic capital projects. While there continues to be significant focus on ambulatory strategy and outpatient access, inpatient capital spending remains equally important. Health systems continue to modernize inpatient facilities with AI-enabled technology and investments designed to improve patient experience, physician recruitment, and operational efficiency.
Increasingly, analysts also want to understand where organizations sit on the AI spectrum. Are systems still piloting use cases, or are they moving toward broader implementation across clinical operations, revenue cycle, workforce management, and patient engagement? Just as important, analysts want to understand the governance structure surrounding AI deployment, cybersecurity, and operational oversight.
Access to liquidity has also taken on greater importance in rating discussions. Liquidity is no longer measured solely by days cash on hand. Contemporary presentations increasingly show daily, monthly, and annual liquidity availability, as well as access to lines of credit and other financial resources.
Ultimately, the balance sheet discussion centers on flexibility. Rating agencies want confidence that organizations possess the financial resources necessary to navigate reimbursement pressure while continuing to invest strategically.
Governance and strategic credibility: Show me that leadership sees around the corner
Management and governance have long been foundational components of rating agency methodologies for not-for-profit hospitals. Rating agencies consistently evaluate the quality, stability, and effectiveness of leadership teams and boards as core credit factors.
Strong governance is often the differentiator between organizations that successfully navigate disruption and those that struggle during periods of stress. In many respects, leadership and governance is the lens through which all other aspects are evaluated.
More than ever, analysts are evaluating whether management teams and boards fully understand the changing environment and whether they are making proactive decisions rather than reactive ones.
Organizations should clearly articulate how they are preparing for future reductions in federal funding. What strategic initiatives are underway today to mitigate pressure that may not fully materialize until 2028? What lessons were learned during the pandemic?
One of the most important responsibilities of a board is to help management see around the corner. There is far less ambiguity today about reimbursement changes that are coming.
Rating analysts therefore want confidence that boards and management teams are already preparing, already modeling scenarios, and already evaluating strategic options. Simply put, there is no excuse for not understanding what is about to happen.
Importantly, rating agencies do not expect perfection. They do expect realism.
The most effective presentations are often the ones that acknowledge challenges directly while simultaneously demonstrating a thoughtful and disciplined plan to address them.
Final thoughts
Rating agency meetings have always reflected the environment in which healthcare organizations operate. Over the past decade, those meetings have evolved from traditional strategic presentations, to crisis-management discussions during the pandemic, and now toward a new era defined by visibility into future reimbursement pressure.
Financial metrics such as operating margin, debt service coverage, and days cash on hand are black and white. But the story behind those metrics—and the forecast ahead—is what brings color to the discussion.
Rating agencies are not simply evaluating where an organization stands today. They are evaluating management’s understanding of why performance is changing, what assumptions drive the forecast, and whether leadership has the credibility and discipline to navigate what lies ahead.
The organizations that will perform best in future rating discussions are not necessarily those with the strongest quarter or even the strongest current margins. They are the organizations that can explain, clearly and credibly, how they intend to remain financially durable through the next cycle.
If I were sitting across the table from you, that is what I would want to hear.
