Strategies for Hospitals to Preserve Cash in the Face of Rising Cost

Hospitals must manage and improve daily cash on hand to ensure smooth and uninterrupted operations.

Adequate cash reserves enable hospitals to meet their immediate financial obligations, such as funding payroll, purchasing medical supplies, and covering other operational costs. This liquidity is essential for maintaining the quality of patient care. Having sufficient cash on hand also allows hospitals to invest in necessary upgrades and innovations, which can enhance service delivery and patient outcomes. It provides a financial cushion to handle unexpected expenses or economic fluctuations, thereby safeguarding the hospital’s financial health and stability. A report jointly commissioned by the American Hospital Association noted a significant decline in cash reserves, with a median health system’s cash days on hand dropping 28 percent from 173 to 124 days between January 2022 and June 2023. This trend underscores the financial pressures hospitals face, impacting their ability to manage operating expenses and invest in future growth.

Effective cash management is essential for a hospital to sustain its community services and achieve long-term strategic goals. A robust cash flow allows hospitals to prepare for both routine and unexpected financial demands. Financial stability not only supports operational needs but also builds trust with stakeholders, including patients, staff, and investors.