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Hospital Finance and the Credit Crisis October 7, 2008

Posted by Who? in Business, Health, Random, technology.
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Last week Rob talked about  how the recession  might affect different sectors within the industry, “More On Health Care and the Recession“.   A hospital, like any business, relies on a variety of financial instruments to maintain operations- both short and long-term.  Naturally, disruptions in the markets that facilitate these transactions can cause some serious headaches for borrowers.

Remarks coming out the the Fed today- “The commercial paper market has been under considerable strain in recent weeks as money market mutual funds and other investors have become increasingly reluctant to buy commercial paper, especially longer-dated maturities.  As the market for commercial paper shrank, rates on the longer-term debt increased significantly, making it more expensive for companies to borrow.” Full article here.

More on the topic from the WSJ HealthBlog– “Hospitals traffic in debt. They borrow money for big construction projects, and they effectively lend money to patients when they treat people without requiring payment upfront.  Unable to borrow money freely or forced to pay a high cost to borrow, employers are cutting jobs and reducing capital investments.”

The credit crunch presents some hurdles for hospitals to overcome but problems can be opportunities in disguise.  The importance of conservative financial management and efficiency are magnified in times like these.  Product and services that increases efficiency start to look a lot more attractive when margins are getting squeezed and every dollar spent is getting stretched further.  Interesting article here on cutting down on “frequent fliers” in the ER– perfect example of an opportunity being capitalized on to improve the efficiency and overall delivery of medical care.

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