Financial Climate Preventing Hospitals From Starting Over
While it’s often advised that financially struggling individuals file for bankruptcy, and that avoiding bankruptcy could be disastrous, a study shows that the situation for hospitals surviving a filing for bankruptcy protection is bleak.
With tougher financial climates in which hospitals find themselves, bankruptcy is no longer seen as a guaranteed step forward for a health care institution. Nearly two thirds of hospitals that filed for bankruptcy protection failed to continue operating afterwards.
Hospitals are finding it harder than ever to turn a profit due to to several factors. If the hospital cannot change the way things are run within their facilities, the likelihood is that the same problems will haunt them again. This concept, more often than not, prevents the hospital from surviving even after filing for bankruptcy protection.
Insurance Companies Causing Financial Strains
Significant changes in government subsidized insurance policies have been preventing many hospitals from rebounding from poor financial situations, according to a 2013 study out of the University of Alabama. Medicaid for example, has lowered the reimbursement percentages to hospitals.
Another reason for hospitals finding it difficult to continue operating after a bankruptcy, is government bodies putting more pressure on hospitals to accept low income patients.
Additional factors include the constant increase of people without any health insurance, and several state laws requiring lower set nurse to patient ratios.
Even after a hospital has filed for bankruptcy, there are often creditors who are entitled to some form of compensation for their earlier loans to the hospital. In the absence of a significant increase of revenue, hospitals find their existing debt difficult to pay off.
Bankruptcy Can Help if There’s Change
If there is a lack of serious change being implemented by hospital officials and its administration following a filing for bankruptcy protection, a hospital will find it tough to stay open.
“Even if the hospital continues to operate, it’s not going to be the same going forward,” said Professor Amy Yarbrough Landry who conducted the study. “If nothing changes, it will fail again.”
Hospital Size Plays a Role
Most hospitals that file for bankruptcy protection and subsequently close are smaller regional or rural hospitals. With people opting for better and more comprehensive health care in larger urban medical centers, the patient flow to these smaller hospitals has dwindled. Combined with the drop in compensation from insurance companies, decreasing patient intake is making it much more difficult for hospitals to generate revenue and survive after filing for bankruptcy.
Contrary to what these facts might dictate, potential investors have continued to maintain high levels of interest in buying struggling hospitals throughout the country. This is in spite of the fact that hospitals are now more difficult to run and new challenges are always on the horizon.