March 3, 2024

WSJ article spotlights hospitals’ continued financial pressure points

An article in the Wall Street Journal, “Some Hospitals That Spent Big on Nurses During Pandemic Are Now Short on Cash,” continues to reaffirm that hospitals and health systems are facing myriad financial challenges that threaten access to care and services that patients and communities rely on.  
  
“Distressed hospitals are reporting they don’t have enough cash to satisfy lenders, which typically require borrowers to meet periodic profit and other financial targets,” the article states. “Lenders are demanding that hospitals hire consultants to help turn around their operations or set aside cash for repayment. Failures to meet such obligations to lenders can technically count as default, putting hospitals at risk of credit downgrades and higher interest rates.” 
  
The article also says that salaries and benefits amounted to more than 58% of the net revenue that hospitals collected from serving patients in 2022, according to Merritt data. That is the highest share in three decades except for 2020, the first year of the pandemic. In addition, the article notes that hospitals are reporting that revenue available to cover debt payments is at its lowest level in 30 years, except for during the 2008-2009 financial crisis. 
  
AHA in April released a report prepared by Kaufman Hall explaining that financial reserves play an important role for not-for-profit hospitals and health systems in ensuring that they can continue to serve their communities in the face of challenging operational and financial headwinds. The report explains how financial reserves enable struggling not-for-profit hospitals and health systems to make needed investments, borrow at affordable interest rates, cover operating expenses and remain available to their communities as surging labor and supply costs, investment losses and other challenges persist. 

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