As major nonprofit health systems grow through mergers and acquisitions, they are starting to resemble big business in their interactions with investors, according to The Wall Street Journal.
Although nonprofit systems don't have shareholders, they do have bondholders through their borrowing in the municipal bond market. To ensure the best rates when they borrow, some nonprofit systems are establishing investor relations teams and hosting investor calls and roadshows.
The increased transparency by nonprofit systems is voluntary. The Securities and Exchange Commission's disclosure rules for municipal bond borrowers are less challenging than those for publicly traded companies. Municipal bond issuers are only required to publish annual financial reports and information involving a few dozen types of events such as bankruptcy or a merger, according to the report.
Livonia, Mich.-based Trinity Health, which has annual revenue exceeding that of half of the companies in the 2015 Fortune 500, has become more transparent with investors. The system sent a team of executives to Boston to meet with investors last year and held its first ever conference call with analysts in October to recap the fiscal year. That same month, Trinity hired its first investor relations executive, Mary Bernest. She told WSJ that the system is planning more investor meetings this year in Boston and New York.
Other large nonprofit systems have also taken steps to become more transparent with investors. Englewood, Colo.-based Catholic Health Initiatives, which has annual revenue of $15.7 billion, held its first investor conference call in November. "When we started to grow, we knew we would have to be more transparent," Dean Swindle, CFO of CHI, told WSJ.
Dallas-based Baylor Scott & White Health will start holding annual investor calls this year.
Although increased openness with investors can benefit nonprofit systems, there are limits on what systems are willing to disclose since competitors can see the same information published for investors.
"Our competitors are mining our data, as we look at theirs," Fred Savelsbergh, CFO of Baylor Scott & White, told WSJ.
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