WASHINGTON, April 22 Pension liabilities,
expenses and contributions remain a burden on U.S.
not-for-profit hospitals despite improvements in the investments
used to fund the retirement systems, Standard & Poor's Ratings
Services said on Monday.
Large pension funding demands will likely "be a drag on the
sector for several years," it added.
"Low discount rates have hampered the improvement in funding
levels despite a rebound in asset values during the past two
years," said S&P credit analyst Liz Sweeney said in a statement.
Pension plans use a "discount rate" to gauge the size of
their obligations, and the lower the rate, the larger the
The retirement benefits promises made to employees pose only
one challenge to the sector, S&P said, adding that many
healthcare systems have redesigned their pensions. As pension
gaps swell in many different areas - most notably state and
local governments - employers are having to put more money into
the systems, and they are worried that leaves less funding for
Many nonprofit healthcare providers have found ways recently
to address "high pension contributions crowding out other needs
like capital projects," said S&P.
"We believe that health systems will continue to implement
plan changes to seek the next level of cost savings within the
context of organization-wide expense reduction measures," it
Not-for-profit health systems and hospitals are also facing
growing demand, changes from the 2009 healthcare law, and
increasing stress on Medicaid, the health insurance program for
the poor, and Medicare insurance for the elderly.