Many hospitals face trouble getting capital

The gap between hospitals that can afford to invest in their capital needs and those that cannot is growing, and those hospitals lacking adequate access to capital are falling further behind, potentially leading to facility closures, a series of reports found.

To survive, hospitals should develop strategic plans for allocating their resources and assets, focus on a few core service lines and invest in technology, according to the final report in a yearlong series of six called Financing the Future. The final installment was released Sept. 2.

The project, led by the Healthcare Financial Management Assn., focused on hospitals' capital needs, and how they access capital. Richard L. Clarke, HFMA president and chief executive, said the project began with anecdotal evidence that there was a gap between access and demand for capital.

"But what surprised us was the size of the gap," Clarke said in an interview. "For some hospitals, it paints a pretty grim picture. And something's got to change for them to survive in the future."

One of the reports found that most hospitals planned to boost capital spending by an average of 14% over the next five years. Other reports in the series revealed that hospitals were finding it more difficult in general to get financing for capital projects and service expansion. Also, nearly half failed to spend enough on capital investments to stay ahead of facility and equipment depreciation.

In the final report, a panel of health care experts examined how hospitals will handle future capital needs and how this might shape the industry.

Clarke said the main challenge for hospitals is to create a clear vision of their futures and to secure a capital path that can lead there. But he predicts that some hospitals will languish along the way, and others will be absorbed by increased activity in mergers and acquisitions.

The hospitals perhaps most at risk for closing are the second- and third-tier facilities in metropolitan areas, said E. Preston Gee, senior vice president of strategic planning at St. David's HealthCare Partnership, in the report.

He predicted that 20% of those hospitals will close in the next decade.