General Electric Co. isn't the only financial firm sounding an alarm about a capital shortage among hospitals.
Citigroup, a leading healthcare investment bank, issued a report entitled "The Capital Gap" in November, asserting that capital likely will be insufficient to meet industry demand, particularly when interest rates rise.
Co-written by the Tiber Group, a management consulting firm, the 20-page report encourages hospitals to innovate services, improve accountability, stretch financial and strategic planning horizons, increase expected returns on investments, and lobby public policymakers for funding. The report draws on data from various sources that points to aging facilities, increasing demand for services and technology, and declining credit quality of hospitals, among other factors.
Citigroup is a sponsor of an annual not-for profit healthcare investor conference, along with the American Hospital Association and the Healthcare Financial Management Association. The annual event is a forum for hospitals and systems to tell their stories directly to bondholders and analysts.
Citigroup Managing Director Frederick Hessler said the firm wants to continue educating its clients about the importance of capital access and plans to issue reports on various aspects of the issue approximately every quarter over the next two years. He said the second report, focusing on ways to elongate planning horizons despite industry volatility, will be published this spring.
"We get constant feedback from CEOs saying there is no way we can plan beyond three years," Hessler said. A 10-year horizon used to be the norm, he said.