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.
“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.“
When I started working at the health system I had already retired once. I took the job because it was a field I knew(telecom) within the hospital. I had been a SVP for a very large bank and had about 1,200 people working for me. In my hospital role, I was running a consolidation project.
Throughout the entire organization I was stunned by the utter lack of professional management training. No supervisor training. No budgeting training. And almost no financial analysis for capital expenses-because there was no set 3-5-10 year capital plan.
They were all smart when it came to medicine. But these docs thought they were smart about EVERYTHING. I spent more time laughing at the way stuff was run than I should have. I would trust these people with my life—but I wouldn’t trust them to manage a lemonade stand.
What was most frustrating is that they were so closed minded to an outsider, they missed opportunities to improve the service, the customer base, and their bottom line. I was never so happy to leave a place after the project ended.