Hospitals saving “rainy day” funds?

The Columbus (Ohio) Dispatch reported that local hospitals have been beefing up their cash reserves, to the tune of $3 billion. According to the Dispatch, OhioHealth has amassed the most cash: about $1.9 billion toward the end of its 2010 fiscal year. That’s enough money to keep the health system, which includes Grant Medical Center and Riverside Methodist Hospital, running for about 356 days, even if its hospitals provided free care to all patients.

 

Why the emphasis on reserves?

 

Hospitals in general are saving more money, said Richard Gundling, vice president of the Healthcare Financial Management Association, based in suburban Chicago.

Gundling cited data from Moody’s that shows the median-rated hospital had 175 days of cash on hand in 2011, up from 149 in 2009. Highly rated hospitals typically have more money in reserve.

Hospital and health-system officials said they need to grow their “rainy day” funds given the uncertainty surrounding the federal health-care overhaul and the prospect of lower government reimbursement for the patient care they provide.

Adequate savings also are important for health systems to keep good bond ratings, which makes borrowing money more affordable.

Deciding how much to save versus how much to reinvest in the community in any given year is “an art, not a science,” said Michael Rutherford, chief financial officer of Wexner Medical Center.

Read the Dispatch article HERE 

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