At HFMA 2025, finance executives are confronting a turbulent investment landscape, and exploring new strategies to optimize portfolios and manage risk.
The first day of HFMA 2025 is off to a fiery start.
Healthcare finance executives convened in Denver to discuss strategy in an industry fraught with financial hurdles across areas like payers, federal reimbursement, and labor costs.
To set their health systems up for clearing these hurdles, finance executives are turning towards nuanced strategies and even overhauls in their investment portfolios. But, execs are also acutely aware that navigating risks and finding liquidity in their portfolios is easier said than done and new strategies are needed.
One thing here is certain: The market is volatile, and has been for some time.
In a session titled "Observations on Health Systems Investing in the Current Landscape," Adventist Health Senior Finance Officer Brandon Seibold and Sarah Siwinski, director at BlackRock investment management, discussed how health systems across the country are performing operationally, (especially in examining expense growth, days cash on hand and cash to long term debt), how they're allocating their investment pools to achieve strategic growth goals, and how investment portfolios will continue to evolve.
Zooming out to an industry point-of-view, a few key enterprise themes in healthcare cited by BlackRock were continued operational pressure on health systems, persistent market volatility, structural industry, demographic and policy shifts, continued M&A activity, and a growing focus on strategic and venture initiatives.
Seibold dove into how Adventist revamped its investment portfolio, saying that the biggest challenges are getting Adventist's investments to reflect its core goals and deploying new strategies to achieve extremely efficient asset allocation.
Two of Adventist Health's top challenges are Medicaid and labor costs, according to Seibold. With more than 30% of its patient base using Medicaid, and a $25/hr healthcare worker minimum wage mandate in California, he says navigating the shifting headwinds is particularly difficult and called for new strategies to find liquidity and efficiency within the system's portfolio.
Seibold says faith-based Adventist Health began with a very conservative portfolio with investment restrictions, and he sees substantial room for improvement staring back at him from the balance sheet.
The session advised CFOs to ask their finance team: "Are we taking the right risk through an enterprise perspective?"
One strategy that helped put investments in perspective for Seibold's team was a cone chart to visualize volatility and risks. When finance teams examine these types of charts together it's easier to collectively examine positive and negative deviations. These charts became a great communication tool across the finance committee, Seibold says.
If returns are within the standard deviation, Seibold says leave them alone. Strategy only changes when there is a big change in the business. CFOs should keep in mind that market volatility doesn't always mandate a strategy change.
BlackRock research suggests that health systems are moving toward investments in private markets that have provided notable returns.
The session urged finance leaders to use peer groups for investment comparison. Through this, CFOs can examine how their system compares to peer groups and the risks they are taking.
Seibold shared that he realized, after looking at this data, Adventist Health owns more real estate compared to its peer groups, translating to lower risks due to no renewals. This data enables the finance team to move forward and feel more comfortable taking more risks.
Two additional tips from Seibold were to involve stakeholders and ensure consistent, clear communication on investment strategies, and set expectations around what volatility means for the finance team and stakeholders.
The CFO To Do List
The session closed with a little homework for CFOs as they navigate their portfolios in today's volatile market. While every organization will differ in its goals, resources, and strategy, CFOs can consider these steps:
* Fine tune governance and risk management;
* Redefine portfolio buckets and optimize strategic asset allocation;
* Align liquidity while limiting cash drag;
* Grow and diversify sheet assets with private markets;
* Adopt innovative structures to maximize returns.
Marie DeFreitas is the CFO editor for HealthLeaders.
KEY TAKEAWAYS
Market volatility is a challenge, but finance leaders like Adventist Health's Brandon Seibold caution against overreacting.
With rising labor costs and high Medicaid patient volumes, health systems are reevaluating portfolios for liquidity and efficiency.
Systems are increasingly turning to private market investments for returns, and leveraging peer comparisons to reassess risk exposure.