Stepping Inside the Shoes of Medical/Healthcare CFO's- new challenges they face with proposed accounting changes

Mazuma Capital Company offers it's employees an extensive cross training program to become familiar with all aspects of the leasing industry.  Last week we had an accounting expert come in and discuss the proposed accounting changes, and how that will impact businesses and leasing experts. As a followup to our training I reached out to professionals in industries across the board.  Below is a summary of what challenges face CFO's in the medical/health care arena. I wanted to share his insights with you on the proposed accounting changes, and how they are preparing. I think it is critical for us to be thinking outside of the box on how to approach these CFO’s by understanding their mindset.  I hope you find it helpful…

Thanks for your questions regarding the proposed accounting changes, and how they will affect medical/health care purchases going forward.  Yes we have discussed the change concerning leases and how they will all be shown as Capital leases on the Balance sheet. It is a particular concern to us and other facilities like us that have large loans on their existing property and have to maintain Debt covenants per their loan documents. For example like Debt Service Coverage and Long term debt to capitalization. This will most definitely put expansions and additions planned for facilities on hold.  Being able to maintain certain grants and financial benefits through the government come to us by keeping facilities profitable.  By adding debt to our books, we will have to re-think our strategies to maintain these benefits we currently receive.

With that said we may have to look at delaying purchase of larger capital items and end up trying to pay cash for them. Smaller Capital items we will definitely pay cash.

Remember too that we operate several hundred Critical Access Hospitals (under 25 beds) that can take advantage of being reimbursed by Medicare at cost. Prospective payment hospitals cannot take advantage of that so it may even be more difficult for larger facilities when looking to purchase larger items, such as MRI and X-Ray machines.

Those are just a few of my thoughts.  We will be interested to see what leasing companies put together as an offering for facilities like ours.  Right now we are going with cash, but if there is a product that arises, I know that CFO’s all over the country will welcome it, if it can help the balance sheet.