THE ROLLER-COASTER RIDE on Wall Street these past few months has given many healthcare providers cause for concern. With cash reserves dwindling and credit opportunities drying up, how can providers invest in new technology or keep what they have up-to-date?
“The overall economy is … forcing people to be creative,” said Mike Sweeney of U.S. Express Leasing, which works with physician practices to finance technology purchases or leases. “The successful solutions right now are the result of collaborations, and that requires a good deal of knowledge of the inner workings of (healthcare IT) vendors.”
Simon Gisby, an analyst with Deloitte’s Healthcare Provider division, says the market turmoil will play havoc with not-for-profit healthcare providers – which comprise about 85 percent of America’s healthcare system. Sources of capital (such as endowments) have dried up, investors are skittish and banks have stopped lending – and yet the demand for healthcare services is on the rise and evidence-based guidelines will continue to drive the hospital’s operating budget.
In this atmosphere, he said, “vendors are scrutinizing the deals a lot more and it’s taking a lot longer to close” a contract. In addition, “healthcare organizations that have existing credit facilities are loathe to refinance, and those favorable terms that were on the table before just aren’t there any more.”
“Vendors are going to have to be more creative, I think, to get the deals done,” he said.
That means looking at different types of financing, leasing, even “pay-per-use” programs.
At The Optimus Group, a Mission Viejo, Calif.-based provider of financing strategies, Blair Ung points out that the banking crisis has reduced the number of lenders, and the amount of capital on hand and negatively affected the pricing of equipment deals. In some cases, he says, banks and lending companies will only deal with existing clients, forcing smaller healthcare providers and vendors to search far and wide for someone to finance their growth.
More than ever, say Ung and company founder Jay Zeinfeld, it’s important for providers to weigh the benefits and drawbacks of new equipment purchases or leases, looking for unnecessary costs, unplanned expenses and long-term gains.
Wall Street’s woes are prompting healthcare providers to take a closer look at how they account for every dollar spent. That’s a boost in business for revenue cycle management vendors.
“The business side of the house has not gotten the attention it needs – and now it will,” says Rod Bazzani of TransUnion, the Chicago-based provider of RCM tools. He says hospitals have to look at how they classify debt – as either charity care or uninsured care – and make more of an effort to settle all financial issues with patients up front.