The world of finance has turned a cold shoulder to healthcare providers.
Repairing the fractured relationship may depend as much on opening channels of communication between providers and financiers as on providers' financial performance.
This month top executives from about 30 hospitals and health systems will travel to Wall Street to discuss their strategies with heavy hitters from the investment community. The forum, organized by Salomon Smith Barney, the American Hospital Association's Health Forum and the Healthcare Financial Management Association, should be viewed as the first step in a long journey toward improving the way the capital markets view the healthcare sector and individual providers. (For information on the gathering, see our story, April 10, p. 116.)
Of late, things have not been harmonious. Providers have been rocked by the escalating cost of capital, a steady stream of credit downgrades and tougher terms from lenders and financial guarantors.
Investors have soured on healthcare. for several reasons. Healthcare lobbyists are prone to poor-mouth hospitals in hopes of securing more cash from the government. That negativity runs counter to the optimism that fuels a growth-oriented economy and gives peace of mind to investors.
Compounding the bad attitude are a number of failed mergers, some hospital and system bankruptcies and bond defaults, and the impact of managed care. There have also been more reports of mismanagement, medical errors and Medicare fraud.
Missing from the news have been positive reports about stronger healthcare organizations, which constitute the majority of providers. But bucking the bad karma in the industry will succeed only if hospitals and health systems routinely provide specific financial information.
The Securities and Exchange Commission requires only that issuers of tax-exempt debt provide annual audited statements. However, Wall Street is much more comfortable dealing with investor-owned companies that disclose detailed quarterly financials and matters of material interest.
Not-for-profit hospitals and health systems must be forthcoming with the capital markets. A recent Cain Brothers capital finance report had it right when it said, "In the future, lenders will gravitate only to those organizations that provide regular, meaningful disclosure to the market."