The balancing act in maintaining liquidity is that while cash – while protecting when something bad happens – doesn't bring much return.
Because of this, financially healthier systems like Mayo, Ascension, and Kaiser Permanente choose to keep relatively little cash on their balance sheets and instead put most of their money into making sure they keep a certain amount in short-term funds, so quickly can be accessed.
"Being in this market is better than being on the top shelf and not earning interest," said Kevin Holloran, senior director of Fitch Ratings.
Mayo is an extreme case with only $ 51 million in cash as of September 30, 2020, or a 0.2% cash-to-assets ratio, which is among the lowest in the country. Mayo's cash was even lower at the same point in 2019.
"We don't leave much in cash," said Dahlen. “Most of it goes into our liquidity funds. The cash flow from operating activities is implemented in our labor fund almost immediately. "
One of Mayo's upstairs neighbors, Children & # 39; s Minnesota in Minneapolis, also has one of the lowest cash-to-assets ratios in the country: it was just 0.3% as of September 30, 2020. The healthcare system had just under $ 5 million in cash and cash equivalents at the time.
Brenda McCormick, CFO of Children’s Minnesota, said the healthcare system maintains adequate liquidity through its lines of credit, federal grants and other resources. Like mayo, it strives to invest as much money as possible.
"We have such a low interest rate environment right now," she said. "Our investment bureau is looking into how we can maximize these returns."
Ascension, based in St. Louis, had cash and cash equivalents of $ 688 million as of December 31, 2020, representing a cash-to-assets ratio of 1.5%. This is a small part of the $ 25.5 billion portfolio of cash and investments. Almost $ 25 billion of this will be for long-term investments. Ascension declined to comment.
Kaiser Permanente also has a small cash balance relative to its size: $ 674 million as of December 31, 2020, or 0.8% of its total assets. The Oakland, California-based healthcare system also draws cash from its sizeable ongoing investments, which at the time were $ 8.4 billion. Tom Meier, Senior Vice President and Treasurer of Kaiser, explained that as a prepaid system, Kaiser also receives a monthly inflow of income from membership fees, which reduces its liquidity needs compared to other systems.
Not every healthcare system has the resources to hold small cash reserves. Those with volatile operations and weaker margins typically need to keep more cash on their balance sheets, Holloran said.
"As a rough rule of thumb, the more stable your operations, the more aggressive you will be with your investments, and the weaker or already, the more conservative you will become," he said.