New Law to Help Warn of Hospital Financial Crises

A new law enacted in New Jersey will require that an early-warning system is in place to help spot financially troubled hospitals before it's too late.

This year alone, four hospitals in New Jersey have closed due to financial woes. A fifth hospital will close its doors on Wednesday.

The new law will give the NJ Department of Health and Senior Services the authority and access to information necessary to monitor hospital finances. The department will then be able to identify financially troubled hospitals long before a crisis occurs.

Hospitals across the country facing similar financial crunches should strongly consider adding Medical Accounts Receivable (MAR) Funding to their financial portfolio. MAR Funding provides an immediate infusion of cash which can be used especially when a hospital or healthcare provider is under fiscal stress.

Financially Troubled Hospital Can't Afford to Improve

Kenneth Hall Regional Hospital has lost an average of $3 million per year for the past 5 years, according to a recent article in the St. Louis Post.

When hospitals struggle financially, a downward spiral frequently occurs. Financial losses make it difficult to upgrade technology and keep the hospital looking attractive. This, in turn, makes it hard to attract physicians and their patients; a circumstance Kenneth Hospital knows all too well.

Kenneth Hospital is a 161 bed facility, but on an average day only about a quarter of those beds are filled. In 2006, federal health inspectors found that the hospital's on-call trauma surgeons failed to respond within the mandated 30-minute time frame.

Mike McManus, COO for the foundation which owns Kenneth Hospital, blames inadequate finances for the hospital's decline in treatment. "We acknowledge that some of our results are not where they should be, but our hospitals do not have cash reserves. What's happened in the past basically is we've repaired things when they break, but we don't have the resources to improve."

McMannus sees a merger of services with its other facility, Touchette Regional Hospital, as only a short term solution for both hospitals' chance of survival.

Hospitals finding themselves in a similar financial crisis should strongly consider Medical Accounts Receivable (MAR) Funding as a solution. MAR Funding is a strategic way to generate working capital. With MAR Funding, a hospital's account receivables can be converted to cash to keep up with ever-changing medical technology, purchase new equipment, invest in additional personnel, and ensure a hospital's financial survival.