HOSPITALS IN TROUBLE

Many people think that selling to healthcare-related businesses is risk-free. I’ve even been told that locally controlled hospitals are very safe to sell because no local county or city would ever let its hospital fail financially. Don’t tell that to companies who recently were told that two local hospitals went bankrupt!

Crittenden Regional Hospital, West Memphis, Arkansas, filed Chapter 7 bankruptcy in September after Crittenden County passed a record sales tax increase to fund the struggling hospital.

Hutcheson Medical Center, Ft. Oglethorp, Georgia, filed Chapter 11 bankruptcy due to excessive debt.

St. Francis Hospital, Columbus, Georgia, while not bankrupt has recently cut over 60 employees due to a $30 million operating deficit after firing its CFO. The company’s revenues were found to be overstated while its expenses were understated and as a result, all financials will have to be re-stated.

The moral to these stories is that none of us has a crystal ball that tells us the future. Bankruptcy is a business strategy that is used more and more often, often when suppliers never expect it to happen. Need to void a union contract? File bankruptcy. Lose a lawsuit? File bankruptcy. Falsify your financials? File bankruptcy… even in the healthcare industry that so many think is immune.

2 Responses to “ HOSPITALS IN TROUBLE ”

  1. February 16, 2015

    Thanks for the great post, Tate. Come to think of it, I would have never doubted the credit worthiness of a hospital! It’s just one of those organizations, to whom you extend payment terms to without second thought.

  2. February 17, 2015

    Many people said also in the past 20 years that start up banks were pretty much a guarantee ( which I warned against) and then 2007-2009 came along and voila. I agree with you – there are certain areas of business which people feel like are immune from financial difficulty but that is just NOT the case.

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