Interview, Other
How Healthcare CIOs Are Investing Capital Through a Public Health Crisis
- The healthcare industry faces major operational changes in 2020 with capital deployment implications extending into 2021, driven by expectations that investment pools will fund research and hospital operations despite potential expenses for personal protective equipment, ventilators, and additional staff.
- Asset allocations for non-profit healthcare organizations are projected to remain consistent with the prior year, while investment teams continue focusing on alternative investments like private equity and private credit, with hedge fund sentiment expected to improve among healthcare clients.
- Respondents anticipate difficulty achieving return objectives due to near-zero interest rates, with market outlooks reflecting growing concerns about a potential recession and a consensus that return assumptions must decline from the past decade due to compressed treasury yields.
- Half of respondents are expected to have implemented ESG in their investment programs by the current period, continuing a trend of increasing adoption since 2019, while investment teams plan to incorporate ESG and diversity factors into due diligence and move toward standardized measurement to better understand their influence on sustainable returns.
- Conservative investment strategies may require institutions to take on substantially more risk or forecast lower absolute returns in the intermediate period to maintain performance, leading to an expectation that the Cleveland Clinic will continue pursuing separately managed accounts in its long-term pool to minimize external decision impacts.
- The Cleveland Clinic forecasts higher community effort spending in fiscal year 2020 compared to the $1.16 billion reported in 2019, alongside expansion plans to open an 184-bed hospital in London next spring, expand clinical trials at the Louvre Center for Brain Health in Las Vegas, and open a new cancer and research center in Abu Dhabi.
- Artificial intelligence and machine learning are anticipated to be critical differentiators for health system survival, with applications in business processes determining net margins and tools used to navigate the transition from fee-for-service to bundle payments and population health models.
- Robotic process automation is expected to be applied to data entry functions previously handled manually by revenue cycle management teams, while the Cleveland Clinic aims to maintain low staff turnover over a decade or more to ensure high-performing investment portfolios.
- The Cleveland Clinic intends to continue delivering investment returns over the next decade or two to fund innovation, maintain connectivity between investment partners and clinical leaders, and produce a diversity and inclusion statement of purpose with four specific goals for partners.
- Engagement activities such as the annual gala, bike ride to cure cancer, and medical innovation summit are expected to continue in adapted virtual formats, with partners also offered access to the clinic's consulting practice if beneficial to their firms.
- Full-scale changes in how healthcare CIOs invest post-COVID are not expected, but existing trends are projected to accelerate, including operating in a virtual environment that impacts team communication, manager evaluation, and the diligence of new opportunities.
- Impact investing and ESG alignment are expected to become increasingly important for driving mission-specific goals beyond traditional investment modes, with a focus on maintaining resilience and supporting hospital operations in the coming years.