In theory, the tsunami of financial problems that's hit Wall Street in recent weeks is enough to scare anyone, even in a business like healthcare that enjoys steady demand. But if a recent analysis by Modern Healthcare is any indication, healthcare finance types aren't sweating things. In fact, they're just waiting for the waters to calm a bit, it seems.
It's not that the supply of healthcare capital hasn't been affected at all, mind you. For example, when Lehman Brothers filed for Chapter 11 bankruptcy, and Merrill Lynch sold out to Bank of America, it definitely created ripples in healthcare investment and financing, as both Lehman and Merrill have large healthcare investment banking units--and they're also some of the top managers of tax-exempt healthcare bonds. Still, Lehman and Merrill's problems haven't slowed trading in variable rate bonds, a popular instrument for hospitals and health systems, as there are still plenty of underwriters out there who can pick up the slack.
Sure, hospitals continue to be worried about the interest rates on their bonds, which, in the case of auction-rate debt can hit the high double-digits. Hospital leaders interviewed by Modern Healthcare seem pretty confident things will settle down again in the markets. The million-dollar question is when, as hospital finance managers worry about the paper they're holding and struggle to determine what mix of debt they should carry.
In the meantime, even with the market meltdown proceeding, stronger health systems and hospitals are still getting financing, particularly if they want to acquire smaller hospitals, observers say. And private equity investors are likely to keep doing deals with hospitals and healths systems at full tilt. After all, healthcare is an asset-based business, which gives it more stable value than, say financial services, no?
To learn more about this trend:
- read this Modern Healthcare piece