What is a common form of long-term debt in healthcare?

Operating leases are a common form of long-term debt in healthcare due to their role in financing the use of property, equipment, and facilities over extended periods. In healthcare, organizations often require expensive medical equipment or real estate, and rather than purchasing these assets outright, they may choose to lease them. This approach allows healthcare facilities to preserve cash flow while gaining access to essential resources without the burden of immediate capital expenditures.

Long-term debt typically encompasses obligations that extend beyond one year, making operating leases a suitable fit, as they often involve multi-year agreements. This structure provides healthcare organizations with financial flexibility and the ability to update or replace assets as technology evolves or as operational needs change.

While accounts payable and current liabilities represent short-term financial obligations that must be settled within a year, and short-term bank loans indicate temporary borrowing, these options do not reflect the long-term nature of operating leases. Thus, operating leases stand out as a viable solution for healthcare organizations looking to manage substantial long-term assets effectively.