Next month chief executives of about 30 major health systems and hospitals will speak directly to investors at what is being billed as the first investor forum for not-for-profit healthcare.
Perhaps never before have so many of healthcare's heavy hitters agreed to gather in one place to plead their case to the investment community, signaling just how determined the industry is to turn around its image.
In the for-profit world, it's routine for management teams to present their financial forecasts to analysts and investors at giant industry conferences. Not so in the not-for-profit sector, where executives typically have only occasional face-to-face meetings or calls with analysts.
Salomon Smith Barney is organizing the forum, May 18 and 19 in New York, along with the American Hospital Association's Health Forum and the Healthcare Financial Management Association.
The idea was spawned at an AHA-sponsored retreat to address the skyrocketing cost of capital for healthcare last fall. "We came back with the conclusion that the crisis isn't lack of cash; it relates to lack of confidence," says HFMA President and Chief Executive Officer Richard Clarke.
Sponsors say it's a first step toward restoring investor confidence in healthcare and addressing criticism that not-for-profits often withhold timely information from investors (Feb. 28, p. 50). By describing how they are dealing with reimbursement and cost pressures, participants hope to increase demand for their bonds and lower the cost of financing.
It's also a chance for individual organizations that frequent the capital markets to meet with the entire investment community at one time, says Fred Hessler, managing director at Salomon Smith Barney. He expects 250 to 300 attendees from rating agencies, bond funds, reinsurers, banks and investment houses.
The event is modest compared with Salomon's annual equity conference, where 150 to 175 companies typically give presentations, Hessler says.
But not-for-profits hope their unified voices will amplify their message. "If you have 10 of us up there talking and it's a believable story, the effect is that it helps bolster the industry," says Steve Orr, chairman, president and CEO of 30-hospital Banner Health System, based in Fargo, N.D.
The diverse roster includes the Detroit Medical Center, which is undergoing a turnaround; profitable Cedars-Sinai Medical Center in Los Angeles; newly merged Ascension Health, based in St. Louis; ex-merger partners Baylor Health Care System in Dallas and Texas Health Resources in Irving; and West Penn Allegheny Health System, which includes four Pittsburgh-area hospitals that were part of bankrupt Allegheny Health, Education and Research Foundation.
Also on the bill are an HMO, Brookline, Mass.-based Harvard Pilgrim Health Plan--recently declared solvent after being placed in receivership in January-and a long-term-care provider, Sioux Falls, S.D.-based Evangelical Lutheran Good Samaritan Society.
Some analysts are applauding the effort to expand dialogue, but they caution that it's only a first step that doesn't replace timely and complete reporting of financial data. Lilly Scher, a vice president in public finance at Eaton Vance Management in Boston, says the forum might help analysts get a better grip on which strategies are working at not-for-profits. But she added, "I don't think anything that would be revealed would be an epiphany."
And while this event could be a watershed, don't look for a lot of publicity: Attendance is by invitation only, and the event is closed to all media except those operated by the sponsoring organizations, says Kathryn Johnson, CEO of the Health Forum, the AHA's education arm. Johnson says the sponsors hope to make it an annual event.