Healthcare Nonprofits Post Strong ROI in 2010

John Commins, for HealthLeaders Media , July 15, 2011

Griswold said that larger healthcare organizations with assets over $500 million reported average margins of 4.4% for FY2010 while those with assets under $251 million reported margins of 2.3%. "It appears that large hospitals and health systems have been able to reduce their operating expenses, increase operating efficiencies and capture greater economies of scale," Griswold said. "Healthcare reform­ -- specifically lower reimbursements -- ­pressures healthcare organizations to control costs, and will likely make them more reliant on support from their investable assets."

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Most healthcare organizations saw moderately lower returns on their investable assets in FY2010, when compared with other nonprofit sectors. The 175 independent and community foundations participating in the Commonfund Benchmarks Study Foundations Report posted an average return of 12.5% for FY2010.

The 69 charities participating in the Commonfund Benchmarks Study Operating Charities Report produced an average return of 11.6% for FY2010.

"Historically, healthcare organizations have higher allocations to fixed income securities than do foundations and operating charities, and in a good environment for equities that allocation likely served as a drag on relative return," Griswold said. Healthcare organizations' average 37% fixed income allocation in FY2010, compared to a 13% allocation among foundations and 20% among operating charities.

Domestic equities provided the best return in FY2010, with an average of 17.8%. Other asset class returns were international equities, 12.8%; alternative strategies, 9.9%; fixed income, 7.8%; and short-term securities/cash, 1.1%.

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