In 2002, the collapse of National Century Financial Enterprises (NCFE), one of the nation's largest healthcare lenders, suddenly left dozens of hospitals without financing and started a wave of hospital bankruptcies throughout the country, reports a recent article on Mondaq.com.
Five years later, in September 2007, nearly 2 dozen private hospitals were in "dire financial straits and in danger of bankruptcy or closure." This current financial crisis for hospitals is not the result of a single triggering event; but, rather reflects the profound industry changes that are making it increasingly difficult for small and mid-size hospitals to operate profitably. The article reports, among the factors contributing to the current crisis are freezes in Medicare reimbursement rates, reductions in Medicaid payment rates, increasing numbers of uninsured patients, and the growing competition from ambulatory surgery centers and specialty hospitals.
Amid all the healthcare industry woes, however, there are still opportunities available. Mondaq reports that healthcare is still a growing industry in the U.S. due to an aging population and technological advances. Hospitals that survive the current crisis will be able to take advantage of these trends.
However, in order to make it past the current credit crunch, hospitals will need to consider a wide variety of financing alternatives. The article points out some financing alternatives including asset-based loans, equipment leases, bond financing and Medical Accounts Receivable (MAR) funding as possible solutions.
A comparison between bank financing and MAR Funding can be seen in the graphic below:
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