If you look at the profit margins of most hospitals you would see it is usually less than 3%—at least on not for profit systems.
Where those hospitals are getting killed is on the cost of capital to stay up to date on the “tech” side. Most of them had bonds in the 4-5% range. They just went up to the 9% rate. For facilities with razor thin margins, this will be the death of the mid sized non profit. They are already cutting services left and right.
Nursing and support staff are in short supply. So those costs are skyrocketing.
Healthcare is already a controlled market because of Medicare. Dont let anyone kid you, the government already sets the price. And they are not keeping up.
Oh. I know. Medicare is in charge. Medicare sets prices and standard for all of it including insurance
Good post.
I worked in the field of commercial lending and at one point they had us looking at financing hospitals.
We concluded (unanimously) they were extremely risky over the long term.
From a financial perspective they operate like several dozen small businesses with all the high risk and (to be blunt) mediocre management practices of undercapitalized small businesses all stuck under one roof or on one campus.
This is the exact financial model that killed the old conglomerates—the hospital administrators looked like they were managing something but in our opinion they were just putting out fires and their business was out of control.
As you say they are totally at the mercy of government funding of various kinds (Medicare, Medicaid) which vary wildly from year to year and decade to decade.
There was no way we would touch a thirty year mortgage note for construction on such a wacko business.