The whitepaper argues that as hospitals grapple with shrinking payments, they are cutting costs at a feverish pace to avoid losses. However, investment returns “are not keeping pace,” according to the report. Almost 40 percent of healthcare organizations’ assets are tied up in fixed-income investments, which do not provide as big of a return.
The endowment model is centered around building more diversified portfolios and reducing reliance on fixed-income investments, according to the report. Whitepaper author and Commonfund Institute Managing Director Williams Jarvis said smaller non-profit hospitals can compensate for the lost reimbursements by obtaining more investment income through the endowment model, which is used by higher education and other non-profits.
“The healthcare business model is changing,” Mr. Jarvis said in a news release. “Larger healthcare organizations and networks already have substantial endowments and possess the scale to manage costs efficiently. But small- and mid-size healthcare providers that lack scale will have to obtain greater investment income.”
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