The University of Kansas Hospital Authority will bring $415 million of health facilities revenue bonds to the municipal market this week against the backdrop of a health care sector facing challenges.
The AA-minus-rated bonds, which mark the first debt issuance for The University of Kansas Health System since 2019, will help fund projects and refinance outstanding debt.
"We have a sustainable financial profile and our operating performance, as you will note, has been improving even though it's a tough market for the health care industry," The University of Kansas Health System Chief Financial Officer Doug Gaston said in an online investor presentation.
The hospital sector was off to a shaky start in 2026.
A National Hospital Flash Report from Kaufman Hall
"Increased expenses, especially in labor, and the persistent increase in bad debt and charity care are not likely to ease this year," Erik Swanson, a managing director and data and analytics group manager at the management consulting company, said in a statement. "Overall structural costs are poised to go up. Hospitals will need to be strategic about where to allocate resources and how to manage spending in what could be a challenging economic environment."
The true impact on hospitals from big premium increases under the federal Affordable Care Act has yet to be felt, while labor pressures are being exacerbated by declines in foreign healthcare workers due to stricter immigration policies, according to Howard Cure, municipal bond research director at Evercore Wealth Management.
"There is also continued capital expenditure pressures in maintaining facilities," he said in an email. "The increase in construction costs also place a burden on hospital finances and the amount of debt needed."
Hospital long-term bond issuance hit a record $41.3 billion in 2025, up 22% from a previous high of $33.5 billion in 2024, according to a Feb. 6 BofA Global Research Report on the municipal market.
"As a percentage of total muni market issuance, hospitals accounted for 7.0% in 2025, above the 10-year average of 5.4%, and the highest level ever," the report said.
It also noted that hospital downgrades exceeded upgrades by S&P Global Ratings last year.
The 30 upgrades and 41 downgrades resulted in an upgrade to downgrade ratio of 0.73, up from 0.22 in 2024 and marking the highest level since 1.05 in 2021," according to the report.
In The Bond Buyer Predictions 2026 Survey of municipal market participants, the healthcare sector
Rating agencies gave the nonprofit hospital sector stable or neutral outlooks with the expectation of gradual financial recovery ahead of
"The sector is resilient amid macro pressures, with margins recovering from post-pandemic lows but still below pre-Covid; Fitch expects continued improvement through 2026 as managements prepare for H.R. 1 cuts, and strong balance sheets provide a buffer," Fitch Senior Director Mark Pascaris said in a statement.
The upcoming University of Kansas Hospital Authority sale consists of $365 million of fixed-rate bonds and $50 million of put bonds secured by a gross revenue pledge, according to the deal's preliminary official statement and investor presentation.
Proceeds totaling $200 million are earmarked to fund a cancer pavilion and the purchase of currently leased buildings at the system's Indian Creek Campus in Overland Park. The deal will also refund bonds sold in 2004, 2011, and 2015. The authority expects to sell $50 million of variable-rate demand bonds on April 14.
The health system declined to comment outside of information contained in the preliminary official statement and presentation.
The deal will refund and restructure outstanding debt to capture savings, while the April offering, will "slightly increase" exposure to variable-rate debt, Gaston said.
The health system, which operates eight hospitals, has a 24% inpatient market share in the Kansas City area, according to the investor presentation. Total revenue in fiscal 2025, which ended June 30, was $5.4 billion, up from $4.5 billion in fiscal 2024, while total assets were $5.1 billion. Maximum annual debt service coverage increased from 3.9 times in fiscal 2023 to 6.1 times in fiscal 2025.
Officials also touted acquisitions
"These hospital campuses are located in markets with higher than average population growth and household income," Brenda Dykstra, the system's chief strategy officer, said in the presentation. "This contributes to a strong payer mix with high commercial payer volumes that continues to experience strong growth."
Fitch, which assigned its AA-minus rating and stable outlook to the bonds, said the acquisitions support the health system's market presence and growth strategy.
"They should also improve UKHA's ability to add capacity through existing facilities rather than new construction," Fitch said in a rating report, noting the system's flagship University of Kansas Hospital is the only academic medical center in Kansas.
S&P also rated the bonds AA-minus, but with a negative outlook that reflects "our view of weak (days cash on hand), which has reached a 10-year low, with the lower liquidity decreasing cushion to support potential unfavorable deviations in future operating performance."
"We believe that the use of bond proceeds and philanthropy to support a sizable portion of the current capital plan as well as projected improvement in operating performance partly mitigate the near-term weak reserves," S&P's rating report added.
The health system's days cash on hand slipped from 161 days in fiscal 2023 and 2024 to 154 days in fiscal 2025, according to the investor presentation.
S&P said its rating "reflects our view of the system's increasing market presence, with geographic expansion by an experienced management team with a focused strategic plan, and with current operating performance and maximum annual debt service coverage reflecting sizable improvement."
The deal is led by Morgan Stanley and Piper Sandler, with KaufmanHall as municipal advisor and Gilmore Bell as bond counsel.
