Yale-New Haven Hospital and most other U.S. nonprofit care providers posted strong investment returns in fiscal 2009, but it wasn’t enough to restore the invested assets in their endowments to pre-recession levels, a survey shows.
Study sponsor Commonfund, a Wilton nonprofit asset manager, found that Yale-New Haven and 84 other hospitals and health systems of various sizes nationwide averaged returns of 18.8 percent before fees on their assets of stocks, cash and mostly bonds – the highest level since the survey began eight years ago, authorities said.
It was also far better than the average negative 21.2 percent return nonprofit health operators posted in fiscal 2008, when the global economy nosedived, taking financial markets with it.
Unlike for-profit hospitals and health systems, nonprofit networks lean heavily on their endowments to augment state and federal reimbursements for the treatment they provide, mostly to elderly and indigent patients.
Yet, even with the improvement, nonprofit health endowments are still well below the level they were before the market crash, said Commonfund Institute Executive Director John S. Griswold.
Check this oversimplified example: A nonprofit care provider with a $1 million endowment invested before the collapse would have realized a $210,000 decline in assets in fiscal 2008, to $790,000, due to the average negative return, the institute says.
However, last year’s investment rebound would have pushed the endowment back to around $930,000.
Regaining that lost investment ground is being made even tougher by recent federal health care reform, said William F. Jarvis, the institute’s managing director and research head.
The reason is all hospitals and health care systems are under pressure to control costs amid an increase  in the number of patients for whom they will be reimbursed under private and public health insurance.
Jarvis pointed to the survey finding that nonprofit hospitals boosted their operating margins – the difference between what it costs to provide care and their reimbursement – to 4.2 percent in fiscal 2009 from 2.9 percent a year earlier.
Given they were unlikely to have seen an increase in reimbursement rates for Medicare and Medicaid, it is fair to assume that most hospitals raised their margins by cutting staff and other expenses, Jarvis said.
The institute says its annual survey is a mirror to the nonprofit care community not only of themselves and their operations, but also is meant to educate their trustees, investment committees and other policymakers about important issues and developments in the sector.
The institute is an arm of Commonfund, which manages about $26 billion in assets for endowments, foundations, health care and service organizations.
