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Hospitals continue struggle against financial collapse

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Ambac
Meltdown
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bad debt

The hospital industry has been struggling for years with razor-thin margins and falling reimbursement. But with Wall Street having a meltdown, too, denying hospitals much-needed capital and credit, this year was something of a capper.

To try to deal, hospital CFOs took some drastic steps. The Wall Street meltdown forced hospitals to restructure their debt whenever they were allowed, such as in California and Massachusetts. Others, however, were simply left holding the bag when their bond rates shot up into the double-digits due to financial market turmoil. Some hospitals were able to refinance their bonds based on the strength of their own credit, but some were just out of luck when bond insurers like Ambac stumbled themselves.

So how have hospitals survived? In some cases, hospitals have begun asking for payment up front to reduce bad debt. Some have announced large restructuring plans, or put off multi-million dollar capital projects. Meanwhile, many hospitals had to lay off employees to try to make ends meet, leading to a record number of mass layoffs this year. The truth is, though, that it seems few have escaped unscathed. It's been something of a bloodbath.

Unfortunately, next year may not look much better. The troubled housing market may increase bad debt, as consumers continue to battle sky-high mortgage rates and unemployment. Meanwhile, insurers are struggling too, which doesn't bode well for wresting good rates out of them at contract time. Let's keep our fingers crossed.

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Please don't take this as a criticism, but in reading your entry, the comment "as consumers continue to battle sky-high mortgage rates" got my attention. A quick check of mortgage rates over the past 2 decades shows the following for a 30 yr. fixed mortgage: 1983 - 13-14%; 1990 - 9-10%; 2000 - 8%. The current 30 yr. fixed rates are at 5% or less. I know things are bad, but comments like this misrepresent what is really happening and add to conventional wisdom that is often wrong. Maybe I missed something.

Thank you. I felt the same way when I was reading the article

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