Non-profit hospital boards set the stage for the organization's finances, but misguided fiscal governance can lead a hospital toward financial ruin, according to a white paper from Lancaster Pollard (pdf).
Even hospital boards with the best intentions can inadvertently focus on the wrong points. Here's are three specific scenarios that could lead to problematic hospital financials or, at worst, total closure.
1. A lack of key policies, especially a spending policy. The white paper focused on a case study of a non-profit healthcare organization that had to shutter its doors after 140 years of operation. The board did not have a concrete spending policy and relied far too heavily on endowments and donations, which ultimately resulted in the organization's demise.
2. Inordinately high Medicaid mix. While non-profit hospitals and health systems treat all patients according to their missions, an excessive mix of Medicaid patients could lock the facility in a "negative spread of revenue" that will not keep pace with higher expenses, according to the white paper. Medicare and commercially insured patients have to become a stable part of the payor mix.
3. No benchmarks to measure wages and expenses. Overstaffing, inefficient staffing, high wages and benefits, and little oversight over government subsidies could doom a hospital. Benchmarks ought to be utilized both internally and among other similar institutions, according to the paper.
Even hospital boards with the best intentions can inadvertently focus on the wrong points. Here's are three specific scenarios that could lead to problematic hospital financials or, at worst, total closure.
1. A lack of key policies, especially a spending policy. The white paper focused on a case study of a non-profit healthcare organization that had to shutter its doors after 140 years of operation. The board did not have a concrete spending policy and relied far too heavily on endowments and donations, which ultimately resulted in the organization's demise.
2. Inordinately high Medicaid mix. While non-profit hospitals and health systems treat all patients according to their missions, an excessive mix of Medicaid patients could lock the facility in a "negative spread of revenue" that will not keep pace with higher expenses, according to the white paper. Medicare and commercially insured patients have to become a stable part of the payor mix.
3. No benchmarks to measure wages and expenses. Overstaffing, inefficient staffing, high wages and benefits, and little oversight over government subsidies could doom a hospital. Benchmarks ought to be utilized both internally and among other similar institutions, according to the paper.
More Articles on Non-Profit Hospital Finance:
Supreme Court Ruling Boosts Non-Profit Hospital Municipal Bond Market
5 Factors Influencing Capital Expenditures at Non-Profit Hospitals Today
Low Interest Rates Spur Illinois Non-Profit Hospitals to Refinance Bonds