Cash on hand will be useful to deal with whatever challenges are lurking around the corner.
While hospital finances on average continue to show encouraging signs, operators’ coffers are in serious need of building up to survive future turbulence.
Following the challenges of the past two years, hospitals’ days cash on hand has weakened and put many organizations in a financially unstable position, according to a report by Syntellis, now part of Strata.
The data from over 1,900 hospitals revealed that the median change in days cash on hand dropped 25.4% in February 2024, compared to February 2022. Year-over-year, cash reserves improved 0.6%, highlighting how difficult it has been for hospitals to create cash on hand in the current climate.
“The steep decrease versus two years ago highlights continued financial uncertainties for the sector, as having lower cash reserves means hospitals are less prepared for unexpected emergencies or sudden market changes, such as natural disasters or mass casualty events,” the report stated.
Matt Heywood, president and CEO of Aspirus Health, recently spoke to HealthLeaders about the importance of a strong balance sheet for hospitals right now, especially in the wake of the Change Healthcare attack.
What the American Hospital Association (AHA) deemed “the most significant cyberattack on the U.S. health care system in American history” is still wreaking havoc after taking place on February 21.
Based on a survey of nearly 1,000 hospitals by the AHA, 82% of operators reported impacts on their cash flow, of which 60% said that the impact to revenue is $1 million per day or greater.
“When you throw things like the cybersecurity incidents, you throw these other issues on, then the balance sheets are weakened from these last two or three years of challenges and it's just continuing to pound down the healthcare industry and that's where you're starting to have the 'have and have-nots,’” Heywood said.
Building up a cash reserve is no easy feat at the moment, but hospital leaders must do their best to manage their income statements and balance sheets to give themselves financial flexibility, according to Heywood.
It will be necessary to weather the storm because “God knows what's coming,” Heywood said.
Jay Asser is the contributing editor for strategy at HealthLeaders.
KEY TAKEAWAYS
A report by Syntellis, now part of Strata, finds that hospitals’ median days cash on hand has fallen 25.4% since 2022.
Hurdles like the recent Change Healthcare attack are eating into hospitals’ cash reserves, causing them to be vulnerable to unrest.
Hospitals should manage their income statements and balance sheets to put themselves in the best position to deal with unpredictability.