Even as the end of the COVID-19 pandemic comes into focus, many health systems are holding tight to the expanded arsenal of liquidity they built up when the crisis hit.
Healthcare providers rushed to add liquidity in early 2020 to ensure they could cover heightened staffing and supply demands even as revenue from procedures plummeted. Many drew on lines of credit or opened new lines, often at outsized prices. Some moved money from long-term investment portfolios into more accessible funds. And they cheered the arrival of accelerated Medicare payments from the federal government.
Even with worst of the pandemic apparently in the rear-view mirror, organizations are, by and large, keeping their guard up and their credit lines open.
“Now it’s about navigating the uncertainty going forward in the year ahead,” said Ash Shehata, KPMG’s national sector leader for healthcare and life sciences.
RWJBarnabas Health in New Jersey, for example, plans to keep a higher level of funding in its capital reserve fund, which is now at $1 billion. That money can be converted to cash within three days, said John Doll, the health system’s chief financial officer.
“If the pandemic taught us anything, it’s that you have to be agile,” he said. “You have to be able to pivot.”
That’s on top of the system’s increased credit line and more than $550 million in accelerated Medicare payments. RWJBarnabas is also considering a debt offering this year, with size depending on the market.
On the other side of the country, reworking the balance sheet to meet the pandemic’s demands was a focus for Sutter Health in 2020, said Jonathan Ma, the health system’s vice president of finance and treasurer, adding, “It’s top of mind in 2021.”
Sacramento, Calif.-based Sutter had just under $800 million in cash and cash equivalents as of Sept. 30, 2020, or a cash-to-assets ratio of 4.1%. That’s part of a broader portfolio of $9.3 billion in current assets, including $6 billion in short-term investments.
Not-for-profit Sutter had considered raising money through a bond offering prior to the pandemic, but might access a new line of credit instead due to today’s lower bank fees and low interest rates.