A Third of European Hospitals Report Operating Losses

AccentureFacing rapidly rising costs, a third (33 percent) of European hospitals are reporting operating losses, generating negative earnings after tax, according to a new nine-country study released by Accenture (NYSE:ACN). Accenture's European Hospital Rating Report includes an in-depth review of the 2011 financial statements of more than 1,500 hospitals in nine countries: Austria, Belgium, France, Germany, Italy, Norway, Portugal, Spain and Switzerland.

The study assessed three factors: hospitals’ creditworthiness, the probability of defaulting on financial commitments and operating profitability. Accenture determined the proportion of hospitals, in each country, with a "low, increased or high risk of default," and found that nearly half (46 percent) of the European hospitals studied are potentially at risk of defaulting on their financial commitments, such as paying vendors for hospital services.

"Many hospitals are placing a high level of financial strain on their national health system, which is unsustainable for the future," said Kiryakos Chebel, managing director of Accenture's Health business in France. "Hospitals need to be as vigilant as commercial enterprises in managing their finances to ensure the stability of their clinical practice."

The research also shows nearly half (46 percent) of French hospitals are considered to be "low risk," in terms of their probability of default, as they can meet their financial commitments, but a quarter were rated as "high risk." Still, this compares favorably to the proportion of hospitals in Portugal (59 percent) and Norway (41 percent) that could face a "high risk" of default.

Beyond an institution's ability to meet its financial commitments, hospitals with a higher-earnings margin (EBITDA[1]) are able to fund investments through their operating cash flow. While France had the second highest operating profitability of the countries studied, averaging an EBITDA margin of 10.7 percent, roughly half of its hospitals still had some risk of default, suggesting they could have insufficient cash flows to cover deficits. In contrast, Italy reported the highest operating profitability overall, generating an EBITDA margin of 12.1 percent, or nearly four times the level of neighboring Switzerland. And, although 48 percent of Italian hospitals face some degree of financial risk, only 16 percent are considered "high risk."

"If the financial management of French hospitals remains unaddressed, citizens within the same country could face significantly different standards of care over time or even see local hospitals having to close," Chebel said. "We still have time to prevent a troubling situation from becoming a crisis, but hospitals must establish business models that will secure a firm financial footing for the future."

Methodology
The Accenture Hospital Rating Report was conducted to assess the financial performance of Europe's hospital market. In collaboration with RWI, Accenture examined the 2011 public financial statements of 1,522 hospitals, accounting for 30 percent of the entire hospital market in the nine countries studied: Austria, Belgium, France, Germany, Italy, Norway, Portugal, Spain and Switzerland. Although not equally represented, the sample is comprised of public and privately owned hospitals with the exception of one country, Spain, which included only private hospitals, as sufficient public hospital data was not publicly available.

The study assessed hospitals' creditworthiness, probability of default and operating profitability. An Accenture classification model, adapted from the MORE rating classes, provided an assessment of the creditworthiness of these hospitals based on a balance sheet and profit and loss analysis. The analysis calculated two key measures: the probability of default, which is the likelihood that an organization will not meet its financial commitments, and EBITDA (earnings before interest, tax, depreciation and amortization) margin, which implies an organization’s approximate operating cash flow, or operating profitability.

About Accenture
Accenture is a global management consulting, technology services and outsourcing company, with approximately 289,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, 2013.

1. Earnings before interest, tax, depreciation and amortization

Most Popular Now

Researchers Find Telemedicine may Help R…

Low-value care - medical tests and procedures that provide little to no benefit to patients - contributes to excess medical spending and both direct and cascading harms to patients. A...

AI Revolutionizes Glaucoma Care

Imagine walking into a supermarket, train station, or shopping mall and having your eyes screened for glaucoma within seconds - no appointment needed. With the AI-based Glaucoma Screening (AI-GS) network...

AI may Help Clinicians Personalize Treat…

Individuals with generalized anxiety disorder (GAD), a condition characterized by daily excessive worry lasting at least six months, have a high relapse rate even after receiving treatment. Artificial intelligence (AI)...

Accelerating NHS Digital Maturity: Paper…

Digitised clinical noting at South Tees Hospitals NHS Foundation Trust is creating efficiencies for busy doctors and nurses. The trust’s CCIO Dr Andrew Adair, deputy CCIO Dr John Greenaway, and...

Mobile App Tracking Blood Pressure Helps…

The AHOMKA platform, an innovative mobile app for patient-to-provider communication that developed through a collaboration between the School of Engineering and leading medical institutions in Ghana, has yielded positive results...

AI can Open Up Beds in the ICU

At the height of the COVID-19 pandemic, hospitals frequently ran short of beds in intensive care units. But even earlier, ICUs faced challenges in keeping beds available. With an aging...

Can AI Help Detect Cognitive Impairment?

Mild cognitive impairment (MCI) can be an early indicator of Alzheimer's disease or dementia, so identifying those with cognitive issues early could lead to interventions and better outcomes. But diagnosing...

Customized Smartphone App Shows Promise …

A growing body of research indicates that older adults in assisted living facilities can delay or even prevent cognitive decline through interventions that combine multiple activities, such as improving diet...

New Study Shows Promise for Gamified mHe…

A new study published in Multiple Sclerosis and Related Disorders highlights the potential of More Stamina, a gamified mobile health (mHealth) app designed to help people with Multiple Sclerosis (MS)...

AI Model Predicting Two-Year Risk of Com…

AFib (short for atrial fibrillation), a common heart rhythm disorder in adults, can have disastrous consequences including life-threatening blood clots and stroke if left undetected or untreated. A new study...

Patients' Affinity for AI Messages …

In a Duke Health-led survey, patients who were shown messages written either by artificial intelligence (AI) or human clinicians indicated a preference for responses drafted by AI over a human...

New Research Explores How AI can Build T…

In today’s economy, many workers have transitioned from manual labor toward knowledge work, a move driven primarily by technological advances, and workers in this domain face challenges around managing non-routine...