Hospitals Struggle to Access Capital
October 27 2003 - 1:00PM
PR Newswire (US)
Hospitals Struggle to Access Capital New Report: 'Financing the
Future' Indicates the Picture Is Getting Bleaker CHICAGO, Oct. 27
/PRNewswire/ -- Facing a headwind of rising demand by aging
babyboomers, many hospitals may not have access to the capital they
need to renovate and expand their facilities for the future.
Hospitals and health systems nationwide are having growing
difficulty using traditional means to access capital to support the
facilities and services needed to meet the burgeoning healthcare
needs of their patients. In fact, according to a new report from
the Healthcare Financial Management Association (HFMA) in
partnership with GE Healthcare Financial Services, the number of
hospitals defined as having broad capital access is dropping and
the number of hospitals defined as having limited access to capital
is dramatically rising. Between 2001 and 2002, the percentage of
hospitals defined as having broad access to capital declined from
42% to 36%. However, the percentage of limited-capital-access
hospitals rose even more sharply, nearly doubling from 11% to 19%,
indicating a widening gap between hospitals in strong and weak
financial health. Operating margins for both hospital types also
declined, but by a much more significant amount for
limited-capital-access hospitals, further separating the "haves"
from the "have nots." This report, How Are Hospitals Financing the
Future? Access to Capital in Health Care Today, is based on a meta
study conducted by HFMA and PricewaterhouseCoopers LLP. Factors
such as bed size, ownership, teaching status and geography are some
of the key differentiators for hospitals in strong or weak
financial health. The report shows that a number of U.S. states are
home to a high percentage of limited access hospitals. Ironically,
the states with a high concentration of limited-capital-access are
also those that depend on healthcare as an industry to support the
state economy, such as New York, Hawaii and the District of
Columbia. This trend has raised several red flags, as the growth of
the healthcare industry may be slowed in these regions,
significantly affecting the local economies. Operational
characteristics also vary between financially strong and weak
hospitals, with utilization playing a key role in determining an
institution's financial success. Between 1997 and 2001,
broad-capital-access hospitals reported a 23% higher average daily
census (ADC) than limited-capital-access hospitals, which suffered
a 12% decline. Operating margins for both hospital groups also
declined, but by a much more significant amount in the
limited-capital-access sector. Despite these trends, capital is
available -- even to hospitals with a shaky financial profile.
Following a careful examination of key financial, demographic and
performance characteristics associated with hospitals classified as
having broad and limited access to capital, the report concludes
that hospitals with poor financial profiles are more highly
leveraged than hospitals with excellent financial profiles, thus
indicating that these hospitals have been acquiring capital either
from alternate sources or prior to the period examined. This report
is the first in a six-part series from a project titled Financing
the Future. The first report focuses on the current state of
capital access: what are the sources, how are they changing, and
what are the characteristics of hospitals with broad and limited
capital access? The report also offers tools to help healthcare
professionals know how to better access capital from various
sources. Website: http://www.financingthefuture.org DATASOURCE:
Healthcare Financial Management Association CONTACT: Terry Arya of
Healthcare Financial Management Association, +1-800-252-4362, ext.
362, , or Deia Lofendo, Communications Manager of GE Healthcare
Financial Services, at +1-312-441-6169 or
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