Hospital Finances Rebounding

John Commins, for HealthLeaders Media , August 19, 2009

"They did it primarily by managing labor expenses, which is pretty remarkable because a lot of the activity is nursing related," Pickens says. "Unfortunately, trying to dissect where they are taking the full-time employees out of their operations is difficult for us. But you would think it would be in overhead-type departments, rather than direct patient care, at least you would hope that."

And though the trends are encouraging, Pickens says hospitals should be concerned about their liquidity. "The average cash on hand has gone from about 120 days to 90 days. That may not seem alarming, except that 90 days is in many cases tied to certain types of bonds or debt covenants that can be triggered if that number gets substantially lower," he says. "It's pretty clear their cash reserves were stretched out during this Great Recession. While there is some sign of recovery, the scars are still apparent in the liquidity area."

Pickens says he's seeing a softening of year-over-year revenue growth that could be exacerbated by healthcare reform. "If a public plan option is enacted or if there is some kind of expansion of the public plan that pays less than commercial payers, that will put further downward pressure on that revenue growth," he says.

John Commins is a senior editor with HealthLeaders Media.

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