CHICAGO, September 13, 2006 - The outlook for capital access and spending for the nation's hospitals is moderately improving, according to a new research report released today. Yet, more than half of U.S. hospitals and healthcare systems continue to struggle in the face of competitive pressure from physician-owned facilities, increasing uncertainty about the future of government-based payments, and the financial strain of high debt loads, infrastructure improvements and technology-related expenditures.

These findings and additional research are further detailed in the latest Financing the Future II series report issued by the Healthcare Financial Management Association (HFMA) in partnership with GE Healthcare Financial Services and Kaufman, Hall & Associates. The sixth report, "The Outlook for Capital Access and Spending," which takes an updated look at research from the first Financing the Future series conducted from 2003-2004, revealed:

• 20 percent of U.S. hospitals have limited access to capital, 60 percent have moderate access, and less than 20 percent have wide access.

• Hospitals not affiliated with a health system (25 percent) and rural hospitals (22 percent) top the list of capital constrained healthcare organizations.

• Geographies with the greatest percentage of limited access hospitals include New York, Washington, D.C, Pennsylvania, New Jersey and California. Conversely, states with the greatest percentage of wide access hospitals include Indiana, Wisconsin, Nebraska, New Hampshire and Vermont.

"A hospital' access to capital can depend upon its ability to respond to market and environmental changes,"said Richard L. Clarke, DHA, FHFMA, president and CEO of HFMA. "rganizations that are relatively nimble and can seize emerging opportunities will continue to have fairly broad access to capital. Organizations at the other end of the spectrum are going to struggle. And organizations in the middle, with moderate capital access, will need to identify their areas of distinctive competence and focus their capital spending on these areas."

When examining industry-ide trends accelerating capital spending requirements, the report identified three top concerns: competition, payment and technology.

Technology spending represents a significant portion of hospitals'planned capital spending, estimated by the American Hospital Association to be approximately $12 billion to $15 billion in 2006. However, Martin Arrick, Managing Director of Not-for-Profit Healthcare at Standard & Poor', cautions that spending on IT doesn' ensure that a hospital will get what it expects or wants in terms of capabilities.

Whether or not spending will be enough to meet consumer and competitive needs remains to be seen. According to the report, hospitals without adequate performance and in highly competitive local markets may fall further behind.

"In order to help close the gap between capital need and spending, hospitals should take a hard look at their mission and portfolio of services," said Randy Fuller, Market Intelligence Manager for GE Healthcare Financial Services. "If some services are marginal, they should think critically about whether they can continue those services and adjust their portfolio accordingly."

"Adherence to a rigorous corporate finance process is critical to a hospital's ability to increase access to capital, make wise investments in the organization's future and improve financial performance," said Kenneth Kaufman, Managing Partner at Kaufman, Hall & Associates. "This is the cornerstone principle of Financing the Future."

Financing the Future II includes six reports published over 18 months for healthcare financial leaders, their staffs and healthcare executive board members. Each report illustrates how actual hospitals and health systems have applied corporate finance principles to achieve successful financial performance and capital access. The first report published in May 2005 covered key principles of better practice financial management, while the second report focused on the "right" capital structure. The third report discussed strategic financial planning and capital allocation and the fourth report addressed the trend of joint ventures with physicians and other partners. Report 5 tackled strategies for financially struggling hospitals and highlighted the warning signs of a distressed organization. The sixth and latest report reviews the outlook for capital access while taking an updated look at research from the first Financing the Future series conducted from 2003 - 2004.

To order this report, or previous reports, contact HFMA at 800-252-4362, and select option 2, or visit www.financingthefuture.org.

HFMA is the nation's leading membership organization for more than 35,000 healthcare financial management professionals employed by hospitals, integrated delivery systems, managed care organizations, ambulatory and long-term care facilities, physician practices, accounting and consulting firms, and insurance companies. Members' positions include chief executive officer, chief financial officer, controller, patient accounts manager, accountant, and consultant. HFMA offers educational and professional development opportunities, information on key issues, technical data and networking opportunities, with the ultimate goal being to create a more supportive environment in which members do their business.

For more information, visit the Association's Web site at www.hfma.org.

GE Healthcare Financial Services, a business unit of GE Commercial Finance, is a provider of capital, financial solutions, and related services for the global healthcare market. With over $15 billion of capital committed to the healthcare industry, GE Healthcare Financial Services offers a full range of capabilities from equipment financing and real estate financing to working capital lending, vendor programs, and practice acquisition financing. With its knowledge of all aspects of health care from hospitals and long-term care facilities to physicians' practices and life sciences, GE Healthcare Financial Services works with customers to create tailored financial solutions that help them improve their productivity and profitability.

For more information, visit www.gehealthcarefinance.com

Founded in 1985, Kaufman, Hall & Associates, Inc. is counted among the country's most respected independent financial and capital consultants, working with healthcare organizations of all types and sizes. Kaufman Hall provides financial advisory services to debt transactions; prepares and implements integrated strategic, financial and capital plans; designs comprehensive capital allocation processes; and assists in the evaluation, structuring and negotiation of merger, acquisition and divestiture transactions. In addition, Kaufman Hall developed and markets the ENUFF Advisor® Suite of financial management software products. Kaufman Hall serves its clients from offices in Chicago, Los Angeles, San Francisco, Boston and Atlanta.

For more information, visit www.kaufmanhall.com

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