Capital Markets: Impact on Healthcare Providers

In the June 11, 2008 issue of H&HN Magazine, Lee Ann Runy's article on "Presenting Your Story to the Capital Markets" has some very interesting insights for hospital executives facing the turmoil of the capital markets and their impact on healthcare providers. In the article she cites Fred Hessler, managing director at Citi, as follows:

With capital harder to come by, hospitals need to return to the basics, says Fred Hessler,managing director at Citi, focusing once again on what has always been important to the capital markets: robust cash flow and a strong balance sheet. “The future earnings potential of hospitals will be challenged. Strong cash flow and balance sheets can absorb the shock to earnings potential,” he says.

As is pointed out, these two criteria have always been important, not only to the capital markets, but also to the success of the hospital itself. The difference today is that because access to debt has been severely tightened, those hospitals who have not paid sufficient attention to their financial strategies and put together effective financial planning to implement their growth or survival strategies are becoming more and more financially hard pressed.

Debt-free funding that accelerates a hospital's cash flow can provide working capital to meet the financial needs of the hospital while at the same time, by making their balance sheet healthier, they can protect their credit ratings. Sun Capital HealthCare's MAR [medical accounts receivable] funding programs exclusively for the healthcare industry is a proven successful financial tool that more and more healthcare executives are adding to their financial toolbox. Because of its flexibility, it can effectively be used in conjunction with a capital and/or debt strategy to fund the financial needs of hospitals.