"This Is Gonna Cost You"

A timely title in the March 3 issue of the HealthLeaders Financial E-newsletter. Everywhere you read about the business of healthcare, the lament is the same. The liquidity crunch hitting the financial markets is driving up interest costs on debt for hospitals across the country. especially those using auction-rate debt. Furthermore, as one CFO is quoted in the article, "...it is taking over all the time of the accountants, investment bankers and CFO's."

Perhaps moreso now than at any other time previously, today's healthcare financial executives need to find additional resources to meet their financial needs - without going into more debt. A solution: accelerate your cash flow and generate more working capital from your operations. However, reimbursement delays compound the problem so that your cash flow is often an obstacle to profitability rather than a source of working capital.

There is a funding tool that does provide a cash flow solution to your working capital needs. Add Sun Capital HealthCare Inc.'s Medical Accounts Receivable [MAR]Funding program to your fiscal strategies and your cash flow becomes a solution rather than a problem. By selling your receivables, you can have cash within 24-48 hours of submission. Instead of sitting on your balance sheet and not yielding any return, Sun Capital's MAR funding program, specifically designed for and exclusively offered to healthcare executives, can help overcome both the liquidity crunch and the reimbursement delays.

Hospitals Hit Hard By Bond Market

According to a recent article in the Minnesota Star Tribune, two major Minnesota hospitals are facing a serious financial situation. The weekly interest payments on their outstanding debt are soaring, putting them in a credit squeeze. This is attributed to investors moving away from bonds backed by insurers who face substantial exposure resulting from the subprime mortgage market. Consequently, some bonds aren't being bought and other deals are being done only at higher interest rates.

This growing trend puts more pressure on CFO's to refinance their debt and add other financing methods to their fiscal strategies. One such tool is medical accounts receivable funding. It utilizes a non-performing asset, a healthcare provider's accounts receivable, to generate debt-free working capital. Since the costs of this funding program do not fluctuate with interest rates, healthcare executives can plan their financial strategies based on a predictable cash flow.

Overcoming the Liquidity Crunch in Healthcare

Despite the lowering of rates by the Federal Reserve, the availability of credit is becoming more restrictive. This is especially worrisome for the healthcare industry. Additional debt and lines of credit from banks are more difficult to obtain while the demands on cash flow for healthcare providers and suppliers is increasing. An underutilized solution to this liquidity crunch, not dependent on the availability of credit or limited by caps on credit lines, is medical accounts receivable funding [MAR funding].

More and more healthcare CFO's are adding this funding tool to their financial portfolio because:

• it is debt-free


• funds are available within 24-48 hours


• the amount of funding grows as their A/R grows


• it provides a predictable cash flow