Perspectives 2019 2020 Public Sector

Citi Perspectives 93 Larger investment portfolios of NFP healthcare organizations have found that custody and non- custody securities lending arrangements can generate significant cash revenue, help reduce investment management operational expenses, and provide incremental portfolio returns. In simple terms, securities lending is a collateralized loan of securities. Lending agents facilitate loans between borrowers (typically brokerage firms) and lenders (large institutional investors). Lenders earn incremental income based on the demand for the security and the reinvestment of cash collateral. Returns are based on a negotiated percentage split of the revenue earned from these transactions. Lending arrangements are defined by a contractual agreement and can be customized based on specific lending parameters. For example, a typical multi-asset investment portfolio with $5 billion in marketable securities to lend could generate nearly $1 million in annualized securities lending revenue. Securities lending, as with all investment strategies, requires prudent risk management and active oversight by investment officers. Adopting corporate treasury best practices As hospitals and healthcare profitability continues to decline, treasurers, CFOs, and procurement officers need to focus on supply chain efficiency and supplies expense management to maximize profitability. Many NFP healthcare organizations have begun to consider tools traditionally used by corporates (including healthcare disruptors) to manage accounts payable (e.g., ACH, virtual cards, and supply chain finance) as a way to manage supplies expense. McKinsey estimates that if the NFP healthcare sector adopted best practices from other industries, supply chain and costs such as patient care could fall by $130 billion. 5 5 Thomas Ebel, Erik Larsen, and Ketan Shah — McKinsey & Company, “Strengthening health care’s supply chain: A five step plan” 2013: 1-7. https://www.mckinsey.com/industries/healthcare-systems-and- services/our-insights/strengthening-health-cares-supply-chain-a- five-step-plan