Marc Andre Pepin

There are many things we should’ve learnt from COVID-19 — whether it’s how to wash our hands, social distancing, or how to spend many, long hours at home — arguably the most important is the need to be prepared for emergencies. 

The panic that took hold of the world in 2019 revealed a level of vulnerability, which we, as a society, undergo in our everyday lives. Furthermore, it revealed how crucial it is to have a healthcare system, on which we can count. 

Now that we are well into the year 2024, many governments are still unable to attest to stable medical care. The pandemic was only the onset of a series of financial downfalls for governments’ health systems; inflation left hospitals scrambling for loans, followed by the biggest Cybersecurity attack on US hospitals in 2021, leaving many healthcare facilities around the world with worsening liquidity rates.  

Defining and Explaining Liquidity

Liquidity is the ease with which an individual or a company can convert one financial instrument into another. Cash is considered the most liquid asset in the world because it can be converted to other assets quickly and efficiently. Companies that are labelled as “liquid” have financial stability and can participate in trade without having to use commissions or bidding. An asset that is not liquid can undoubtedly be valuable but its trading restrictions can cause panic in times of need. 

Medical Facilities Without Liquidity 

Although there has been an attempt to recover from the many obstacles that present themselves, hospitals struggle immensely to get back on their feet. A 2024 report conducted in 1,900 hospitals revealed that cash-on-hand rates dropped 25.4% from the year 2022. Every year, cash reserves improve by 0.6%, hardly keeping up with the current climate and covering old and new debts. 

Healthcare bodies – as in every business – are one element within a long chain of suppliers, investors, and employees. For years, they have been unable to meet their obligations because of the increase in supply costs and salary demands. 

Hospitals’ unstable financial situation has been causing an imbalance between expenses and revenues which could lead to seeking an urgent deferral of payment deadlines or to a forcible reduction in payment periods. 

However, the responsibilities and obligations medical facilities hold go beyond every other business. Hospitals are accountable for every aspect of their customers’ health. If a hospital lacks liquidity and can not pay for the right supplies, medicine, and staff, it could precipitate an irreversible health risk for its patients. Moreover, to stay competitive in more open markets and to be able to provide the best access and quality of healthcare, state-of-the-art equipment needs to be bought, updated and maintained for which liquidity is necessary.

Achieving Liquidity 

Understanding the importance of liquidity is the first step towards financial stability. Many healthcare facilities fail to prioritise the requirements involved in a strong financial foundation, leading their business to plummet. Hospitals’ inefficient use of technology can cause trouble in keeping up with revenue cycle reports and fall behind on reimbursements. 

To improve efficiency and accuracy, it is recommended to use Electronic Health Records and other similar digital tools that support hospitals in keeping track of records. In addition, an external revenue cycle audit can improve cash flow and identify errors that are harder for the average eye to spot. Those devices allow healthcare centres to have a better, overhead view of their liquidity and to begin a good rhythm of expenses and revenues.

Hospital management can reduce risk by changing its strategy so it is weary of its asset allocation. Telehealth services can benefit both the medical centre and the patient as it is cost-effective, easy and proven to be a chosen method for many medical care recipients. 

Establishing and maintaining lines of credit, along with having good and strong relationships with lenders and suppliers gives room for a smoother transaction and negotiation.

Since money flow heavily depends on the suppliers rather than the medical centres, it can often be held up and the liquidity may lose its balance again. A simple solution for that is a securitisation company that manages the transaction cycle by maintaining medical centres’ liquidity and allowing them to operate efficiently while ensuring the rest of the transaction is completed. 

Liquidity Is The Priority

Liquidity indicates the financial health and stability of a business. Managers who focus on achieving liquidity build a stronger foundation for their company, their partners, and their consumers. 

Liquidity enables medical centres to receive all the equipment and supplies required to provide proper healthcare services. It ensures the facility’s ability to be efficient, accessible, and effective, all while being prepared for any and all emergencies. 

Sadly, natural disasters and mass casualty events are not rare occurrences, and in order to maintain financial balance in hospitals and to feel confident that in case of need befitting healthcare can be distributed, medical centres must place liquidity as their top priority.