State and local governments across the United States are limiting spending as the economy continues its decline and tax revenues falter, which is why about 50 percent of short-term, acute-care hospitals are either insolvent or near insolvency, according to a recent Alvarez & Marsal Healthcare Industry Group report. The report expects many of these facilities to face serious funding issues because they do not make a profit from patients and are forced to rely on government subsidies and charitable contributions, which often are not stable sources of revenue. Moreover, the report indicates that hospitals’ capital expenses are underfunded by up to $20 billion, and about 1,000 hospitals deemed “profitable” do not have enough money to remain competitive or meet regulatory obligations. These trends could force facilities to restructure or close, and the report indicates many of these potentially insolvent hospitals are located in urban areas. Alvarez & Marsal Healthcare Industry Group Managing Director George Pillari says, “With a government safety net becoming less and less reliable and nonpatient sources of funding becoming fragile, it has become critical for hospital management and boards to deal with these troubling issues head on and take urgent steps–such as restructurings, mergers or recapitalizations–to improve their finances and allow hospitals to execute on their missions. In the absence of such action, hospital insolvencies will increase and community after community could be forced to grapple with a steady decline in access to care.”
Filed under: Uncategorized
