Over the past few months, I have had numerous conversations with Hospital CEO’s. Each of these conversations seem to center around their respective hospital’s financial operations and the fact that their net profits have deteriorated over the last one or two years to the point that they are now showing losses. These CEO’s are now asking their CFO’s the hard questions as to what is happening and what can be done. Most responses from their CFO’s are generally the same whether it is increased bad debts due to the recession and people loosing their jobs or people increasing their health insurance deductibles for lower premiums even forgoing their health insurance altogether, resulting in increased bad debts and charity care. Some blame healthcare reform and the unknown parameters surrounding it. While others say it is as a result of increased costs associated with wanting to improve the quality of care and customer service.

I believe all these factors and others definitely contribute to declining profits, but placing blame does not eliminate the realities of their respective situations. I usually tell these CEO’s that it is like an individual having health problems and then placing the blame on something or someone, it does not alleviate the problem; only going to a doctor, getting a diagnosis and then treatment will eliminate or control the problems. Hospitals have to do the same thing, get help. By help I mean get some expert advice from other financial resources such as bringing in a financial consulting firm or another CFO, on an interim basis, to work with your existing CFO and other individuals in order to get a fresh look at the facility’s finances and operations from a different point of view and then develop a diagnosis and treatment plan. This treatment plan, I am sure, will eliminate or at least control the real problem of declining profits or increasing losses by increased efficiencies, lower costs, and newfound revenue from doing things differently.

-Bruce Jacobs
Director, Financial Management Services