Healthcare Organizations Nationwide Are On The Brink Of Financial Calamity

The global economy has undoubtedly been tumultuous across all sectors. The healthcare industry has faced unique turmoil over the past few years, especially with significant fluctuations due to the Covid-19 pandemic, which, for many organizations, entailed an unprecedented shock to status-quo financial pipelines.

Earlier last week, Moody’s, one of the world’s most established and well-known credit rating organizations, issued a “downgrade” rating for Envision Healthcare Corporation, one of America’s largest physician-based healthcare groups. The rating agency explained plainly: “The ratings downgrade reflects Moody’s view that Envision’s capital structure is unsustainable, that the probability of a bankruptcy or major restructuring is high, and that recovery rates for much of the company’s debt will be low. The company’s ongoing decline in profitability, weak liquidity, and Moody’s expectation that operating performance will continue to deteriorate given labor pressures impacting the industry and rising interest rates that will cause interest expense to nearly double. The refinancing has not materially reduced debt, and while the maturities have been extended, Envision remains at risk of being unable to service its debt.”

Envision, a national medical group, has more than 25,000 clinicians as a part of its organization, and contracts out to some of the country’s most prominent healthcare facilities. However, like other medical groups, it has had its challenges in the last few years, including changing reimbursement rates, numerous hospital staffing issues, and fierce competition in the market.

Needless to say, Envision is by no means the only organization that is facing this struggle. Earlier this month, Borrego Community Health Foundation, a prominent healthcare group in California, filed for bankruptcy. The organization is noted to have a roster of nearly 120,000 patients across numerous undeserved communities. It is one of the main healthcare groups in the Coachella Valley, notable for the music and arts festival that draws millions of people to the area annually. Certainly, the local community will feel the impact of its financial distress.

Unfortunately, during times of financial difficulty, healthcare organizations often depend on more metric driven care in order to attain more detailed accounting of staff timing and productivity. They also prioritize higher value products, which may impact the allocation of resources and staff to other low-yield but necessary services. This often takes a toll on healthcare workers, leading to increased attrition—which then feeds back into the original problem and causes a viscous cycle.

Indeed, there does not seem to be a straightforward answer to this dire situation. Like the rest of the world, healthcare organizations will likely have to “wait it out” to make it through this economic downturn. Time will tell, however, which organizations are resourceful and savvy enough to make it to “the other side.”