Cash Buffetology

Use your cash wisely, invest in organizations that provide real value to your stakeholders. Growing a hospital is a difficult operation. Hospitals don't have the margins and cash flows to make big aquisitions. We can't use this as an excuse, but should use it as reason to invest our cash more wisely.

Many people know Warren Buffett as an extrordinary investor, but I look at him as an incredible businessman who knows how to grow an organization. Hospitals should look at Buffett's growth strategies as a means of minimizing risk and running high class operations.

There are two Buffettisms that I think are applicable to hospitals:

1. When others are greedy that is the time to be scared, and when others are scared, that is the time to be greedy. One thing I have learned from Mr. Buffett is that sitting on cash and waiting for the right opportunity is infinately smarter than spending cash on the next hot thing that comes along. Not too long ago, hospitals went on a craze of merging with other hospitals in hopes of aquiring economies of scale. They didn't look closely at how they were using their cash, only that they didn't want to be left without a dance parter.

2. Aquire organizations that have a position in the market that is impervious to price fluctuations. Another business can always slash prices to compete, but not all can provide a service of such value that price is no object.

All investors are instructed to read Buffett's chairman's letters for guidance. Hospitals should give it a try.

Photo courtesy of Forbes magazine