| Tightening cash flows coupled with the likelihood | | | | What should the provider do? |
| of increased capital spending are a cause for | | | | 1. Work with financial service companies that |
| concern among healthcare system executives. In | | | | really know healthcare. By that, I mean a |
| a recent report by the Healthcare Financial | | | | company that can truly understand the provider's |
| Management Association entitled "Financing the | | | | goals and strategies as well as the particular |
| Future", some startling conclusions were reached | | | | needs of the patients. They need to work with |
| regarding current capital spending:o The | | | | companies that put forth financial solutions like |
| deteriorating financial condition of hospitals are | | | | equipment leasing that don't sacrifice or |
| making capital access more difficult.o The gap | | | | compromise other segments of the business. |
| between "haves" and "have nots" are widening as | | | | 2. Shed assets that are a financial drain on the |
| to capital access, creditworthiness, and the ability | | | | healthcare provider. They need to determine |
| to finance the future. | | | | which real estate assets are productive for the |
| As for the predictions of future capital | | | | future success of the business and which are not. |
| expenditures, the study compiled some interesting | | | | For example, medical office buildings are difficult |
| statistics:o 72% of CFO's expect capital | | | | to maintain and manage. Selling the asset to a |
| expenditures to increase in the next five years.o | | | | third party owner can relieve the provider not |
| 85% of hospital CFO's surveyed said they | | | | only the headaches of property management, but |
| thought it would be more difficult f or their | | | | can free up cash and improve the balance sheet |
| organizations to fund capital expenditures in the | | | | dramatically. |
| futureo 63% responded that they expected to | | | | 3. Control expenses and improve operational |
| be more dependent on cash from operations to | | | | functions. Although many of the expenses of a |
| fund capital needs. | | | | hospital or practice are fixed in nature, there are |
| Staying as up to date as possible with new | | | | still strategies that can be employed to improve |
| equipment technologies and replacing aging plants | | | | the bottom line. One method is to periodically |
| are a key priority among health providers. These | | | | perform employee reviews to determine which |
| organizations also must spend money on cleaning | | | | staff members are productive and which aren't. |
| up old liabilities and build outpatient facilities in order | | | | An untrained or simply incompetent nurse or |
| for their operations to be viable in the future. | | | | other staff member can cost the facility a lot of |
| However, expenditures for updated equipment | | | | money over time. The analyst should also review |
| such as over $1 million for an updated PET | | | | the purchasing policy of supplies and surgical |
| scanner aren't being matched by income. Reduced | | | | instruments. Is the facility taking advantage of |
| Medicare reimbursements haven't covered costs. | | | | quantity discounts? Are competitive quotes |
| As a result, healthcare systems have had to | | | | received from other medical supply distributors? |
| make up the difference. | | | | 4. Collections can likely be improved. When |
| From the patient perspective, they don't want to | | | | collection staff members follow up on both third |
| visit a facility that merely "keeps up". Patients are | | | | party and self pay receivables, rather than just |
| paying more out of pocket expenses than ever | | | | wait until they become considerably past due, |
| before. As a result, they expect to be able to | | | | days outstanding usually decrease. This can make |
| benefit from the technological advances they read | | | | a tremendous difference in the amount of |
| about in the newspapers. | | | | available cash flow. |
| The gap between what patients need and what | | | | It is clear that capital struggles are likely to |
| cash-starved healthcare providers can provide is | | | | continue for the foreseeable future and it is critical |
| ever widening. This gap is likely to remain in effect | | | | that healthcare system executives must "think |
| if factors such as the Medicare situation, escalating | | | | outside the box" to remain competitive and in |
| malpractice insurance premiums, and technology | | | | some cases, survive. |
| that is costly, continue to squeeze cash flows. | | | | |