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Business management in times of crisis

Hospitals facing strategic and economic crises are nothing new in themselves. The fact that it affects so many at once and to such a large extent, on the other hand, does. Here we present ways out of the crisis.

17. August 2023

Business management in times of crisis

Jan Hacker

The health care system in crisis

Hospitals facing strategic and economic crises are nothing new in themselves. The fact that it affects so many at once and to such a large extent, on the other hand, does.

There are many reasons for this, and they are not just to be found in the regulatory framework. Rather, medicine has changed more than hospitals in recent years and decades. The resulting necessary adjustments create tremendous pain.

Other players in the healthcare system are also not geared up for the necessary structural changes. However, the buck predominantly stops with the clinics. This proves particularly challenging, as hospitals are expected to simultaneously handle emergency outpatient care and are not paid for those cases that cannot be cared for elsewhere as a shortfall. This is compounded by a significant shortage of staff and costs that are rising at a much faster rate than revenues.

The result of this mixture of factors is the biggest crisis in the German hospital market to date.

Business management for hospitals as a solution to the crisis

For hospitals that are not part of a group, there are several solution options.

  • On the one hand, an attempt can be made to counteract this with “on-board means“. In some cases, this works well if the general conditions allow it and the management and shareholders make and implement the right decisions.
  • It is also possible to sell the hospital to a group that can have higher-level management structures and broader financing options. Until about 15 years ago, this was often the method of choice, especially in the municipal sector.
    In the meantime, however, a broad consensus has developed among the population that they would like to see inpatient hospital care provided by the public sector. Privatization is therefore politically unpalatable in most cases.
  • An alternative is therefore to conclude management contracts, i.e. to transfer the management of the hospital to a company specializing in this area.
    If the company is sufficiently large and specialized, this allows the expertise of a network structure to be brought in, in addition to the management position, without having to sell the clinic.
    This increases the competitiveness with the “big players” and the shareholder can continue to make all strategic decisions for his houses and his supply region himself.
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Business management as a solution for hospitals in crisis

Now which option for which hospital is the right one?

Hospitals that are strategically and economically well positioned continue to have no compelling pressure to change. Unfortunately, there are not many of them left.

For the numerous houses in crisis, it must first be clarified whether a restructuring is economically feasible on the part of the shareholder. As a rule, going concern rather than reorganization through insolvency proceedings is the preferred solution.

Insolvency proceedings (e.g., protective shield proceedings) often do not solve the core problems of the hospital (e.g., underutilization, staff shortages), but further damage confidence in the hospital.

If the reorganization is not economically feasible for the shareholder over a period of 2-3 years, privatization or closure must be considered.

If it does, the management contract offers a suitable way out of the crisis for hospitals. Here, the combination of management and access to subject matter experts from different fields can bundle the development and implementation of a recovery plan in one hand.

And best of all: Even after completion of the refurbishment, the houses benefit from the permanent affiliation to a competence network such as that of Oberender AG. Unfortunately, there is currently no end in sight to the crisis in the hospital market.

Does that sound interesting to you?

For more information on our business management expertise, please click here. Our experts from the hospital management competence area in Mandat look forward to hearing from you.

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With our expertise, we do not provide you with pretty colorful pictures, but with actionable strategies that will make your hospital fit for the future.

Jan Hacker

Chairman of the Board

+49 921 7454430
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