Hospitals in distress. Problems and solutions

In the past five years the number of hospitals in financial distress has increased alarmingly. And though hospital administrators are feeling more optimistic now that their institutions will survive, they recognize the need to remain vigilant. It is important to recognize the warning signs of financial distress. Hospitals normally proceed through four stages of financial disintegration if no measures are taken to intercede: weak performance/condition, default, bankruptcy and dissolution. As the stages progress, fewer options for redress can be taken and loss of personnel and assets becomes inevitable. Materiel managers who regularly monitor key statistics, such as non-salary expenses per adjusted occupied bed, days in accounts payable, inventory dollars per adjusted occupied bed and so forth, can recognize the warning signs and take appropriate measures. Corrective actions can include reducing inventory levels, renegotiating contracts and leases, rebidding key contracts and supply items and extending purchase payment terms. A case study shows how a medical center experiencing weak performance implemented expense reductions in utilization, contracts, purchase costs/rebidding and inventory for substantial savings.