Time for Sound Fiscal Strategy
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So why does it matter?
To make a deeply flawed but helpful analogy, your state may be running a budget surplus, but that doesn't mean that unsustainable federal deficits won't have a detrimental effect on you, eventually. Similarly, the view that healthcare is at best a low-growth business is reinforced when downgrades outpace upgrades.
There are positives. Low interest rates have allowed many to refinance and even take on additional debt to fund the deep structural changes that are needed to transform business and clinical practices away from the current fee-for-service reimbursement environment.
Low interest rates coupled with expense reduction and waste elimination strategies have also allowed the bold to chase acquisition and fund outpatient growth strategies that may have previously been cost-prohibitive. But expense reduction and balance sheet improvement have their limits, and interest rates won't always be this low, say analysts from Moody's.
"With expected flat revenue growth and many low-hanging expenses already removed from operating structures, management teams and hospital boards will seek deep process changes to reshape their model of healthcare delivery and create greater efficiencies," the report argues.
If you're delaying this type of deep systematic change for any reason, you won't be able to hide much longer.
Because time appears to be growing short for those who have failed to articulate a strategy of how to survive independently in a much more complicated financial milieu for hospitals and health systems, and because some of the reasons for upgrades noted here have a limited degree of sustainability, you should be aware and be ready to adjust your strategy quickly.
The time for watchful waiting on strategy appears to be over.
This article appears in the April 2013 issue of HealthLeaders magazine.
Philip Betbeze is senior leadership editor with HealthLeaders Media.
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