The Capital Behind Care: From Credit Ratings to Strategic Growth

The world is changing quickly, and health systems need to keep up with AI, clinical innovation, therapeutic discoveries, an aging population, the shift toward outpatient care and more. But transformation is expensive and requires capital to modernize facilities, invest in new equipment and technology, and build the services communities will need next.

Healthcare finance can feel opaque outside the C-suite, but it’s central to the future of care. For not-for-profit hospitals especially, access to capital markets and the credit ratings that shape borrowing costs can determine whether a long-term vision becomes reality.

In this episode of Healthcare is Hard, Keith Figlioli spoke with Lisa Goldstein, managing director of treasury and capital markets at Kaufman Hall. After decades at Moody’s evaluating the financial strength of hospitals and health systems, Lisa brings a rare perspective on how investors, rating agencies and health-system leaders weigh risk, cash flow and strategy. Lisa and Keith discussed topics including:

• The mechanics of a credit rating. With common misconceptions about what a credit rating is – or isn’t – Lisa gave a quick history lesson about how the system works. Rather than a pass-fail grade or seal of approval, a rating is a way for investors to assess an organization’s likelihood of repaying its debt and the risks they take on by investing. While this system has existed for more than a century, Lisa explains why ratings have come to carry such outsized meaning for health systems, and why leaders need to manage their financial performance proactively.
• The difference between for-profit and not-for-profit. As Lisa points out, “Not-for-profit” does not mean “pro-deficit.” Even though nonprofit hospitals do not have shareholders, they still need durable margins and cash reserves to sustain operations and invest in their communities. And because they cannot raise equity by issuing stock, the tax-exempt bond market is a critical way they finance major projects. This is an advantage not available to their for-profit peers, which instead rely on taxable corporate debt and equity markets.
• The heroic work of health system CFOs. With responsibility for ensuring an organization has the financial strength to carry out its mission, hospital finance leaders must balance strategy, governance, operations and clinical care. Lisa describes that work as heroic. Navigating difficult negotiations with commercial payers, while being unable to negotiate reimbursement rates with government payers that account for a growing share of the payer mix, is just one challenging element of their role. Ultimately, they have to protect cash flow and preserve the capital needed to invest in the organization’s future.
• Why healthcare will continue to be capital intensive. There’s an ongoing debate about whether advancements like AI, virtual care and therapeutic breakthroughs will make healthcare less capital intensive. But Lisa doesn’t see that happening anytime soon. With an aging population, rapidly evolving treatments and equipment, ambitious ambulatory plans, and aging hospital infrastructure, she believes capital needs will remain high. The question is not whether health systems will need to invest, but how they will prioritize, finance and manage that investment.

To hear Lisa and Keith discuss these topics and more, listen to this episode of Healthcare is Hard: A Podcast for Insiders.