In an effort to be transparent about hospital finance, we offer some context, and some of the reasons why it’s important for hospitals to maintain financial stability.
Occasionally, as part of the ongoing health care cost dialogue, the issue of hospital assets is raised and the question is asked – why do hospitals need “reserves”? A state report in 2010 showed that many hospitals and health systems across the state had some level of investment assets.
One point to consider – hospitals, unlike insurance companies, do not have reserves. Hospitals maintain investment assets. In fact, the state report referenced above stated, “While relatively clear standards for insurer surplus have been developed[…]hospitals do not generally designate assets as ‘reserves’ except for certain liquid assets set aside to meet debt service requirements.”
On the other hand, insurance companies, like Neighborhood Health Plan (NHP), which recently joined the Partners family, are required by regulators to maintain a certain level of reserves/surplus