Healthcare was the fastest growing category of municipal bonds in 2024, with issuance more than doubling from the previous year to $36.55 billion, as the nation's health systems rebounded from the impacts of the COVID pandemic, and state agencies and local authorities stepped up financings for acute care hospitals.
The 116% surge in healthcare bond sales from 2023 marked "a splash back from depressed issuance the few years prior," said Matt Fabian, partner at Municipal Market Analytics. "There were some really difficult years because of COVID," he said. "Last year was the first year or so after that period. Hospitals have become a little more stable."
Last year also marked a rebound for hospital credits from a "really rough year for covenant violations in 2023," Fabian said. In 2024 "Investors become more confident." He also attributed some of last year's increase to the need to refinance private loans some healthcare facilities had taken out during the difficult preceding years.
Among the biggest 2024 healthcare bond sales were:
- A $1.9 billion issue in April by the South Carolina Jobs-Economic Development Authority to finance the acquisition of three hospitals by Novant Health Obligated Group;
- A $1.3 billion sale in August by the Hillsborough County Industrial Development Authority for Baycare Health System in Florida;
- A $1.2 billion issue in September by Berks County Municipal Authority for Tower Health;
- A $1.1 billion sale by the Dormitory Authority of New York for Northwell Health Obligated Group in October; and
- A $718 bond issue in March by the Colorado Health Facilities Authority.
"In second half of the year capital expenditures, which had slowed down or were delayed, started to pick up," said Suzie R. Desai, managing director & sector lead for the U.S. not-for-profit healthcare group at S&P Global Ratings. "We expect that to continue into 2025 in terms of the pickup in spending and debt issuance."
S&P last year lifted its outlook on the acute health care sector to stable but wrote in its report that the outlook remained "shaky" for many lower-rated issuers because of an uneven economic recovery and regulatory challenges.
Desai said she's keeping an eye out for policy changes under the Trump administration that could affect hospital debt. She listed concerns about removing or reducing the tax exemption for municipal bonds, changes in the way Medicaid and Medicare are funded, and tariffs as factors that could increase risk for hospital funding.
"Those concerns are out there," she said. But, she added, the impact of changing policies probably wouldn't hit the market until 2026.
General acute care hospitals accounted for $30.27 billion of the 2024 healthcare deal volume, up 138% from 2023, according to LSEG data. The number of issues for these facilities jumped to 206 from 138 in 2023. Bond issuance for continuing care facilities increased 37% to $2.72 billion, while the volume of pediatric hospital bonds more than tripled to just over $2 billion.
Financings for continuing care facilities rose by more than one-third to $2.72 billion in 58 transactions from $1.98 billion in 45 transactions in 2023. Bond issuance for single-specialty hospitals and general medical facilities slipped by 42% to $382.4 million and by 5.4% to $186.5 million respectively.
State agencies and local authorities accounted for almost $33 billion, or 90% of total healthcare issuance in 2024. State agencies sold $20.54 billion of healthcare bonds, up from $8.4 billion in 2023, while local authorities raised $12.45 billion for healthcare, up from $4.86 billion.
Healthcare issuance by cities and towns rose 55% to almost $1.1 billion while issuance by districts dropped 30% to $1.0 billion.
Tax-exempt bonds dominated healthcare last year, as taxable bonds accounted for just $1.56 billion of total volume, compared with $34.63 billion of tax-exempts. Still, a taxable issue of $286.9 million for Westchester Medical Center Health Network was The Bond Buyer's Healthcare Deal of the Year, honored for its pioneering use of a taxable tender offer.
Revenue bonds accounted for almost all of the healthcare financing, while general obligation deals sank to $643 million from $1.36 billion in 2023. Almost $27.6 billion of the healthcare financings were new money deals, compared with just $2.9 billion of refinancings and $6.1 billion of combined new money and refinancing deals.
Fixed-rate borrowing dominated healthcare in 2024, more than doubling from the previous year to $29.27 billion. Variable rate (short put) bonds increased to $4.13 billion from $1.6 billion, while variable rate (long/no put) deals decreased to $1.49 billion from $2.5 billion in 2023. Linked rate deals surged to $1.23 billion, more than five times the $245.9 million in 2023.
Bond insurance on healthcare issues was unchanged from 2023 at $1.45 billion. Letters of credit increased to $2.4 billion in 2024 from $711 million the previous year.
Bank-qualified bonds increased to $278.2 million in four transactions in 2024 from $14.6 million in three transactions the previous year.
