Have debt will travel
Not-for-profits meet in N.Y., talk about changes
Health systems face tighter margins and more pressure to work closely with physicians as coverage expands and payers grapple to contain costs under health reform, said healthcare executives in New York last week at a healthcare finance conference.
Executives gathered at the Waldorf Astoria for the Non-Profit Health Care Investor Conference said expected changes to healthcare delivery in the coming decade under this year’s health reform laws have spurred investment in technology, quality and cost-control efforts while leaving executives more cautious about capital spending. The two-day, yearly event lets borrowers showcase their operations and strategy for investors and credit analysts.
Sponsored by the American Hospital Association, the Healthcare Financial Management Association and underwriter Citigroup, the event has mushroomed beyond its origins as healthcare borrowers’ chance to pitch their strengths to municipal bond investors. The conference drew roughly 600 people, a record, including executives from 27 borrowers who pitched their organizations’ operations before investors. Those organizations had about $37.8 billion in outstanding debt last year. But among the attendees were also health system executives eager to hear how presenters— including some of the largest health systems with the strongest finances—are readying for reform.
“We’ve all been very careful about raising new money,” said Todd LaPorte, chief financial officer and senior vice president of Scottsdale (Ariz.) Healthcare. The system, which owns three Arizona hospitals, closed its books last September with $10.5 million in income on revenue of $808.1 million, and was among the lowerrated borrowers to go before investors last week. Standard & Poor’s rates Scottsdale BBB+ while Moody’s Investors Services and Fitch Ratings list the system A3 and A-, respectively.
LaPorte said health reform has accelerated capital investment in clinical integration and information technology. Hospital executives, faced with the prospect that reform laws replace incentives for high-volume hospital care with those that reward efficiency and care in the outpatient setting, are less certain about capital projects to expand hospital bed capacity, he said.
The sector also anticipates declining margins as federally subsidized insurance squeezes hospital reimbursement by $155 billion in the coming decade, said LaPorte and other executives at the conference. Scottsdale executives’ project the system will see $40 million less in revenue during the next 10 years, despite expanded insurance coverage, as health reform provisions take effect.
Scottsdale used Medicare rates to
LaPorte: “We’ve all been very careful about raising new money.”