As a result of reimbursement cutbacks from private and government payers, hospitals and hospital systems are shifting their investments to riskier alternatives, according to a new report by the Commonfund Institute.
A study of 86 healthcare organizations by the Connecticut-based investment firm concluded that 21 percent of their assets are in "alternate" investments such as hedge funds and real estate. That compares to 15 percent in 2009--a 40 percent increase.
"That's a huge shift in such a short period of time," William Jarvis, the institute's managing director and head of research, told NorthJersey.com. "Because of those pressures from government and insurers, there's more pressure on the hospital endowments to perform better."
Meanwhile, hospitals continue to sink billions into new construction.
Jarvis noted that the shift is similar to what has been seen in other traditionally not-for-profit sectors, such as universities.
However, hospitals have not yet enjoyed consistently better returns. According to Communfund, the 86 healthcare organizations studied realized zero gains during fiscal 2011. That compared to a 10.9 percent return in fiscal 2010 and an 18.8 percent return in fiscal 2009.
But the trailing three years of returns have averaged 9.6 percent. By comparison, the trailing five years have realized an average return of 1.8 percent.
To learn more:
- read the NorthJersey.com article
- here's the Commonfund Institute research announcement