Health systems turn to municipal bonds for strategic growth investments
Some health care leaders are moving past post-pandemic cost containment and are forging forward with strategic growth initiatives. Inextricably linked to these strategies is the need for robust digital infrastructure investments such as enterprise resource planning platforms and electronic health record implementation and optimizations. These types of strategic investments take a significant amount of capital, and for organizations like state and local government-owned health care facilities, many can access capital through issuing municipal bonds.
Shown below, municipal bonds issued by health care organizations are at nearly an all-time high.
Many public health systems deferred major capital expenditures during the height of the pandemic, opting for operational stability over massive construction or equipment refreshes. Now, some organizations have a pent-up demand for health care services and essential capital projects necessary for long-term viability. The issuance of municipal bonds addresses that need. And, while bond yields have experienced volatility, the inherent tax-exempt status of these debt instruments remain a powerful incentive, offering a cost-of-capital advantage that may be too significant to ignore for many organizations.
The takeaway
Before implementing any investment strategy, health care organizations should continue to deliberately evaluate enterprise value drivers, like financial sustainability, operational efficiencies, quality of care and community impact, and choose wisely to fund certain investments to achieve long-term success.
