More Commentary on the Credit Crunch

The "This Week in Healthcare" column in the March 3, 2008 issue of "Modern Healthcare" continues the discussion as to how hospitals are searching for exit strategies to escape from the credit markets. A Vice President of Ponder & Co., Michael Tym, referring to the bond market, is quoted as saying "We have a belief that the market is broken, and not going to be viable."

Various refinancing plans to deal with the credit crunch and resulting rise in interest costs of the auction-rate debt market are discussed, but they basically all entail exchanging one form of borrowing for another form in the search to lower the soaring interest costs resulting from the bond market insurers exposure to the subprime market.

This article, like so many others describing the search for financing strategies to deal with the liquidity crunch, fails to look at a debt-free funding strategy that is readily available to healthcare executives. Hospitals and healthcare networks are carrying on their balance sheets a non-performing asset that is not generating any return. Through a medical accounts receivable [MAR] funding program from Sun Capital HealthCare Inc., hospitals can turn their receivables into cash that can go to work for the provider rather than sit on the books collecting dust. Because of reimbursement delays, the providers cash flow is often an obstacle to growth and profitability. But with a MAR funding program, hospital executives can be funded within 24-48 hours of the submission of claims. The cash can then be put to work. Since MAR funding is not a loan, the availability of funds and the cost of funds is not tied to the credit market, so healthcare executives can plan their financial strategies with a predictable cash flow.