Non-profit health care organizations are experiencing increased pressures in multiple areas, including strengthening the balance sheet, optimizing resource allocation, executing the broader organization’s strategy, and delivering on mission. With so many moving parts—from payment to policy uncertainties to idiosyncratic risks for each organization—now may be a good time to conduct a financial wellness checkup. Specifically, the board-designated asset pools1 can be a source of risk and opportunity, and it is important to know where limitations or opportunities may exist.
The following table2 highlights several key industry trends, which can have short-term and intermediate-term impact on the balance sheet, the financial metrics, and the credit rating. How each organization is affected will depend on its operating environment as well as its ability and capacity to manage the trade-offs.
Organizations need to assess where they currently are, where there is flexibility, and where there are risks. Just as with a broader organization’s enterprise risk management team, the investment committees should identify, assess, measure, monitor, and plan for risks and opportunities related to the investment asset pools.
The board-designated asset pools can be a source of risk and opportunity, and it is important to know where limitations or opportunities may exist.
1 Including short-term and long-term operating assets, funded depreciation, and other unrestricted reserves.
2 The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only and should not be considered investment advice.
3 Based on calendar-year 2016 PBGC filings for single employer pension plans covered by the PBGC.
4 For further details, see Aon Hewitt’s white paper “Managing Health Care Reserves: AligningOperating Assets with Broader Organizational Goals.”
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