Financial crises have made accessing capital from international markets including the United States, China and Japan as well as emerging nations, such as India and Brazil for hospitals and healthcare service providers.
At the same time, market changes and healthcare reform have moved these providers to invest in capital expenditures that address physician employment, informational technologies, facility expansion and modernization, and “state-of-the-art” medical equipment and clinical procedures.
Strategic Investing
Recessionary periods that began in 2007 put limits on national and international liquidity and access to capital by creating less flexible terms and more “hoops” for lending institutions to jump through. Global financial crises adversely affect most industries including healthcare. Consequently, hospitals focus more resources and energy on executing mission priorities, such as high levels of “patient-centric” healthcare, while evaluating which strategies can access capital.
International hospitals are pressured to improve operating cash flows and often find profitability and liquidity challenges related to currency fluctuations, healthcare reforms, competition, operating revenues, expenditure requirements, high costs for equipment, and profitability.
Although larger healthcare organizations typically face less obstacles pursuing capital than smaller hospitals, each system needs profits to remain competitive. Strategic investing, such as a well-designed, strategic business and financial plan along with partnerships, acquisitions, and mergers will achieve capital.
Medical tourism projects face similar capital constraints including steady revenue from patient streams. As markets shift and new regulations are enacted, identifying risks and effects in the medical tourism industry will be more important to hospitals and healthcare service providers.
Savvy senior management, in turn, is pressed to define what strategic responses and strategic investing in medical tourism can achieve long-term goals. These initiatives are characterized as best practices.
Elements for Best Practices
1.Understand financing and credit positions
— Financial performance is improved by combining performance metrics and sound management with timely and accurate reporting and analysis;
— Plans and goals are measured quarterly.
Benefits: Organizations with strong credit profiles have lower capital costs. Lenders/investor pools are larger for organizations with outstanding credit profiles.
- Identify and evaluate financing options
— Full range of both traditional options — bonds, direct loans, and non-traditional resources and investors and investment firms;
— Pool of potential lenders.
Benefit: Having this plan in place reduces time and efforts for raising debt capital.
- Evaluate and determine financing strategy
— Choose capital markets and lender after considering issuance costs, “all-in” borrowing costs, interest -rate risks and covenants;
— Ensure financing vehicle provides flexibility and is understood by senior management.
Benefit: Senior management should have a fundamental understanding of the underlying benefits and risks of each financial instrument.
- Engage experienced professionals with senior management
— Financial advisor must understand a hospital’s position, credit profile, and role of finance team;
— Financial advisor must have extensive knowledge and relationships with traditional and non-traditional lenders and investment firms.
Benefit: Experienced financial advisor will navigate through the capital-funding process, and “sort out” best options.
Conclusion
Stakes are high for hospital and healthcare service providers. Healthcare executives are not in position to “wait-and-see” before accessing capital. To ensure an institution is exposed to capital options, senior management must deploy best practices that entail a commitment and understanding of the strategic and financial positions.
Hospitals and health service providers must continue to practice strategic investing to remain competitive. Operating performance alone will not support higher capital expenditures. Senior management must proactively preserve credit positions by collaborating with experts to identify a broad range of funding alternatives.
About the Author
Don Lloyd Williams, M.S., is chief executive officer of Princeton Healthcare Inc., a global financial advisory firm that has successfully completed healthcare and infrastructure projects in the Europe, Asia, South America, Africa and the Caribbean.
Williams has been active in international the financing and healthcare/hospital development marketplace for more than 20 years. A former executive for Siemens, he advises the U.S. Department of Commerce and International Trade Administration. www.princetonhealthcare.net; dwilliams@princeton-healthcare.net
