Children’s Minnesota exists for one purpose only: to improve children’s health by providing the highest quality care.
Many factors have to be in place for us to accomplish this mission. Here we’re going to focus on just one: our finances.
To continue delivering top-notch care, we have to be financially responsible and sustainable. Not only to keep the lights on and the doors open, but to be able to continually re-invest in the people and infrastructure that make our highest quality care possible.
Investing
Assets decline in value if you don’t reinvest in them. If you don’t stay on top of car repairs, your car’s value will decrease. If you don’t keep up with maintenance on your house, over time it will lose value. The same is true of Children’s Minnesota. We need funds to be able to maintain our value over time. These funds come from what we call our margin. Our margin is what is left over from our annual operations earnings, after we pay all our expenses. Ideally our margin is about 3-5%.
When we have these margin funds, we put them into a reserve and then we invest them. We are very strategic about how and where we invest. We aim for the highest return on our investments and choose investments that align with our mission and vision of helping children thrive. We diversify them to reduce our risk. We then use the income from our investments to fund efforts that support our mission, including:
- The many services essential to caring for kids which we provide to families for free, like our outstanding child life services.
- Community benefits, which include uncompensated and charity care, community health programs, research and education. As a nonprofit health system, we take very seriously our responsibility to provide services and address pressing health needs of children in our community.
- Capital projects. Just like a family saves money for when they need to do home repairs, we save and use money to maintain and upgrade our equipment and facilities to meet the changing needs of our community.
Proceeds from our investments also help us build strong financial reserves to ensure we can continue meeting community needs, even during unexpected storms, like the COVID-19 pandemic.
Issuing bonds
For large projects, like major equipment or new buildings, we need to borrow money. As a nonprofit, we’re allowed to do that by issuing debt in the form of bonds. It’s not too different from taking out a loan to buy a home. If you’ve ever applied for a mortgage, you know that a bank will look at your income and savings to determine if you qualify. Similarly, bond rating agencies expect nonprofit hospitals to have a certain margin and a certain amount of money in their reserves.
Issuing bonds allows us to make big important improvements that will help us maintain our value. For example, right now we’re working to implement a new electronic health record system called Epic. This technology is an essential investment that will have enormous long-term benefits for our patients and staff. If we didn’t invest in this technology, the experiences of our patients and staff would decline, and so would the value of our health system.
By ensuring our access to capital, we can maintain state-of-the-art facilities, improve our technology and expand our services. All of that translates to better patient care.
In all our financial practices, we’re subject to strict oversight by health care accrediting bodies. We also must adhere to federal and state regulations that prioritize patient safety and care quality. We closely follow all rules and regulations because it’s the right thing to do.
Our reputation and long-term viability depend on us continuing to deliver the highest quality care. Doing anything to compromise the quality of our care would harm our reputation and financial stability, and most importantly, it would harm our community. This would ultimately affect our chances of attracting future investment. Our bondholders understand that. They share a mutual interest in our ability to provide the highest quality care.
These are a few important ways we are working to remain a fiscally responsible, sustainable, nonprofit health system. We’re fortunate we’ve been able to maintain this status for more than 100 years now. By continuing to follow the same principled financial stewardship, children and families in our community will be able to count on us for many decades to come.
Marc Gorelick, MD
President, chief executive officer
Marc Gorelick, MD, is the president and chief executive officer (CEO) at Children’s Minnesota. He is deeply committed to advocacy issues that impact children’s health, sustainability and advancing diversity, equity and inclusion.
Learn more about his book, “Saving Our Kids: An ER Doc’s Common-Sense Solution to the Gun Crisis.” All proceeds from the book will be invested back into Children’s Minnesota gun violence prevention work.
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