Cash flow problems plague US nonprofit hospitals, health systems

Editor's Note

A new low for median days cash-on hand could spell trouble for US nonprofit hospitals and health systems, Healthcare Dive reported August 12.

“Nonprofit hospitals’ cash on hand — the funds immediately available to finance daily operations — is one indicator of financial health,” the outlet reports. “Low cash on hand can impact providers’ ability to pay vendors, be ready in case of emergencies or invest in new capital expenditures.”

The source of the article is a report from S&P Global Ratings on how staffing shortages and inflationary pressures have ramped up expenses since 2020. The report showed significant variation in cash on hand across different health systems, with some reporting sharp declines in liquidity. Despite this, capital spending increased, often accompanied by new debt, which could lead to negative credit ratings in late 2024.

According to the article, key findings include:

• Median days cash on hand fell below 200 days for the first time in a decade in 2023, marking a 10-year low.
• Cash flow did not meaningfully improve from 2022 to 2023.
• Operating expenses grew at 5%, a significant drop from the 17% reported in 2022.
• The gap between the strongest and weakest performers grew, with with top performers reporting modest operating margins of 2.5%, while lower performers faced negative margins of -2.7%.
• Even the strongest performers have not returned to pre-pandemic cash flow levels.