From the President
Richard L. Clarke, DHA, FHFMA
During the past two years, healthcare financial leaders have dealt with the perfect storm: the great recession, national and local healthcare reform, and the financial meltdown.
Individually, each circumstance would have added significant complexity to the already busy schedules of those who manage the finances of complex enterprises. But experiencing all three at once created an environment that was nearly overwhelming.
Of the three circumstances, the financial meltdown probably had the strongest impact on finance leaders. Both sides of the balance sheet were under attack simultaneously. Investment portfolios took a breathtaking dive. Remember, it was just a little more than a year ago that the Dow Jones Industrial Average hovered at 6,500-a low we hadn't seen for decades. Within a few months, investment portfolios lost from 20 to 40 percent of their previous values. Liquidity and debt covenant alarms sounded throughout the industry. Scary times.
And debt structures were experiencing a Six-Sigma event-banks collapsed, insurance companies were downgraded significantly, and the market for many dependable debt and credit-enhancement facilities stopped functioning. Boards were very nervous, executives were very concerned, and financial leaders scrambled to respond.
And respond they did. In the course of a year and a half, hundreds of billions of dollars of debt was restructured (sometimes multiple times). This restructuring required constant monitoring of debt and credit facilities markets; endless meetings with financial counselors, bankers, bond authorities, and lawyers; and review and rereview of mind-numbing documents.
On the other side of the balance sheet, similar meetings were being held with investment consultants, portfolio managers, and lawyers to restructure investment portfolios. Finally, multiple finance, investment, and board committee meetings were necessary to explain what happened and was likely to happen, and the future strategies that would be necessary. Boards often were skeptical and, in some cases, second-guessed long-standing investment and capital-structure strategies. But finance leaders continued to seek short-term and long-term solutions, and worked hard to protect the vital assets and capabilities of the enterprise. No less than preserving a significant and valued community asset was at stake.
Again, all of this happened in the middle of a significant economic downturn and the prospects of significant healthcare reform at both national and local levels. These issues impacted other areas within the purview of financial leaders, including revenue cycle management, physician relations and alignment efforts, operational and expense management, and overall capital planning. Those efforts continued, and for most organizations, financial performance has returned to expected levels.
Although a lot of work continues to be done in these areas, and the prospects of long-term payment reform will challenge all of us, all I can say is, wow! And congratulations on a capital job well done.
Publication Date: Thursday, April 01, 2010