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Credit Worthiness in Healthcare, Micro and Macro Analysis

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It is possible to speculate that state legislators would prefer allocating dollars to activities that produce

short-run economic benefits than long run economic savings. If this observation is reasonable

then it can be concluded that Public Health may never receive its fair share of the pie unless it can

demonstrate that it too produces significant economic activity within a state. Although behavior and environment may account for as much as 40% of the nation's health problems, state expenditures for public health to address these are relatively low. The per capita budget allocation for Local Boards of Health (LBHs) by the State of West Virginia in 2006 for Basic Public Health Services (BHS) was about $6.91, and total public health funding was between $63 and $91 per capita depending on the definition of what constitutes public health. At the same time, Medicaid expenditures by the State were approximately $269

major problem facing the United States' health care organization is surplus capacity (Stanko, 2011). Unreasonable investment in equipment and plant usually leads to lower profitability in the health care marketplace (Stanko, 2011). Health care leaders use the total asset and fixed asset turnover ratios to assess usage of fixed assets. Most health care organizations incur debt and borrow capital on a regularly to survive in the market (Wareham & Majka, 2003).

Heath care organizations require resources to successfully function. One of the most important resources of a health care organization is capital (Egger, 2001). The health care organization's board and management team must maintain a minimum credit rating that permits the organization to compete effectively in its marketplace. Credit ratings do matter.

A health care organization's durable position is dependent on the organization's capability to increase capital in the debt markets (Wareham & Majka, 2003). The long-term position also depends on the organization's creditworthiness and credit rating. "An organization's creditworthiness is a function of a number of factors, including historical financial performance, market position, governance and management, strategic and financial plans, net debt position, size, payer mix, physician relations, and debt legal structure" (Wareham & Majka, 2003, p. 11). Financial performance and net debt position indicate a health care organization's capability to pay back debt (Wareham & Majka, 2003). A rating organization's focal point is on cash flow created from key ratios and on the core operations. In regard to revenue, rating agencies reviews the health care organization's influence in negotiate contracts in the market, payer mix, and reimbursement terms. The market position entails determining the level to which the health care

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