Financing EMRs Requires Hard Assets, Not Promises

If you want a high-end EMR, it might be a good idea to finance it.

After all, few organizations want to tie up hundreds of thousands (or millions) in cash on hand. After all, they need it to keep their bond ratings solid — Moody’s and S&P frown on hospitals with tiny cash reserves — as well as making sure the lights stay on if income starts to lag.

Doing so can be tricky, though. Even if your hospital has great credit and strong cashflow, it’s still very hard to get an unsecured loan these days.  In fact, banks have pulled back so far that they’ve practically dropped the loan business. (We can laugh at the irony later!)

That being said, there’s a loophole available, suggests Brian Cox, president and CEO of Walled Lake, MI-based Interstate Medical Finance.  Virtually no one will lend a hospital money to buy an EMR directly (“it’s just stuff on a disk” to lenders, Cox says), but if your facility is willing to  put up solid collateral, it’s another story.

One option,  he notes, is to put up your receivables as an asset against the loan. Your facility could probably finance an EMR easily with the funds it could generate from receivables factoring, as such loans are called.  Since the lender itself looks at the credit-worthiness of the endebted parties, it depends on them rather than you.

On the other hand, it doesn’t come cheap.  Factoring lenders charge 8 percent to 9 percent or even more on receivables. “Sure, it’s expensive,” Cox says. “But it may be a small price to pay to stay in business.”

If hospitals want a cheaper option, they can put up their hard assets as collateral for loans.  Most hospitals have plenty of assets banks value, Cox notes. “Hospitals are stuffed with equipment,” he says. “And they have real estate.  New office buildings ( are especially attractive).”

If they borrow against assets, hospitals with good credit can enjoy rates as low as 4 percent to 41/2 percent, while hospitals with poor credit might get rates of 6 percent to 61/2 percent, Cox reports.

About the author

Anne Zieger

Anne Zieger

Anne Zieger is a healthcare journalist who has written about the industry for 30 years. Her work has appeared in all of the leading healthcare industry publications, and she's served as editor in chief of several healthcare B2B sites.

   

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