What Are Healthcare CFOs Working On?

Lining up liquidity, figuring out the federal stimulus packages

We checked in again with Eric Jordahl, a capital markets expert at Kaufman Hall, about what healthcare CFOs may be working on amid the COVID-19 epidemic and the economic consequences of social distancing. Jordahl told us a little over a week ago that CFOs were contacting their relationship banks, seeking lines of credit or making plans to do so depending on their organizations' short-term liquidity needs. Here is what he had to say:

That work is continuing. Banks are getting inundated with requests, not just from healthcare but pretty much every segment of the economy is trying to do the same thing - the  lining up of liquidity. I think the primary level of external liquidity formation is ongoing.

The second thing that has come out is the federal stimulus packages. I think finance teams are busy trying to understand two things. The first is, what kind of dollars might those generate for their organizations?  And when might they use those dollars for liquidity purposes. 

[Consider the advanced payment mechanism.] Basically, the way that works is you have to start repaying it after a certain amount of time so it is an advance on things. If [the repayment] is a certain number of days after you start utilizing it, when do you sequence that?  That is the kind of thinking going on.

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The third part is trying to put in place financial forecasting models that might be able to help describe on a rolling basis what changing liquidity needs will look like.

If all of this magically clears out in a month, that is going to produce one level of liquidity issues.

If this goes on for six months, it is a whole other thing. So trying to understand the different scenarios, what the liquidity gaps look like going forward are paramount.

I don’t think there is such great modeling out there because there is so much uncertainty.

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