Moody's Nonprofit Healthcare Methodology Elevates Financial Strategy, Benchmarking, and Risk Management

On May 28, 2026, Moody's published the first substantive changes to its hospital and healthcare system rating methodology in about a decade. Changes include removal of some credit factors, introduction of new assessments, and recalibration of others. These changes elevate the role of financial strategy, capacity, benchmarking, risk management, and alignment of treasury and investment strategy. The new methodology also represents a substantial change in Moody's approach to rating tax-backed debt of hospital districts.

Compared with Moody's prior methodology, key changes include:

- Pledges of tax revenue (commonly used by district hospitals) are now rated under the nonprofit healthcare methodology instead of tax-backed methodologies. Credit is given in the analysis for the strength of the economy that supports the tax base and the attendant revenue diversity.

- Moody's lowered the weight assigned to operating revenues from 25% to 15%. This means that sheer size, while still important, would no longer carry outsized weight

- The revenue growth measure (3 year CAGR), formerly used as a proxy for demand, was replaced with a more qualitative assessment of brand and strategic positioning

- A formulaic assessment of payor mix was replaced by a more qualitative assessment and increased recognition of nonpatient revenue like donations, health plans, royalties, etc.

- Increased weight is now given to the strength of qualitative factors including risk management, financial policy, business strategy, and capital investment.

- Moody's expanded its definition of debt, now formally including operating leases, contingent obligations, unfunded pension and OPEB liabilities, and contractual commitments such as energy-as-a-service agreements.

- The new methodology gives slightly more weight to days' cash on hand.