top health system investment issues in 2016 ... - mercer · pdf filetop health system...

H E A L T H W E A L T H C A R E E R

T O P H E A L T H S Y S T E M I N V E S T M E N TI S S U E S I N 2 0 1 6

P U T T I N G I T A L L T O G E T H E R

© MERCER 2015 1

T O D A Y ’ S S P E A K E R S

Michael Ancell, CFAHealthcare InvestmentsNational Segment Leader

Lori Wright, CEBSSenior Consultant,DC and Financial Wellness

Stefan Gaertner, PhDSenior ConsultantWorkforce Strategy

© MERCER 2015 2

P U L L I N G I T A L L T O G E T H E R

E N T E R P R I S E - W I D EI N V E S T M E N T A N D

F I N A N C I A LS T R A T E G Y

1

R E T I R E M E N TP L A N

R E V I E W

R E T I R E M E N T P L A ND E S I G N W I T H

P E O P L E S T R A T E G Y

SUCCESS

© MERCER 2015 3

A S S E S S I N G A S S E T P O O L SA N D / O R L I A B I L I T I E SI N D E P E N D E N T L Y C A N C R E A T ES U B O P T I M A L R E S U L T S

• Long-term Capital Pool (LTCP)• Endowment(s)• Defined Benefit plan(s)• Defined Contribution plan(s)• Foundation(s)• Captive Insurance Sub(s)

Enterprise-wideinvestment andfinancial strategy

© MERCER 2015 4

SOLUTION CONSIDERATIONS•Contribute from LTCP (or borrow) to the DB planto eliminate PBGC variable rate premiums

•Optimizes enterprise value -- equivalent to anadditional 4.4% return on contributions andstabilizes earnings

•Will reduce DCOH or increase debt, but improvecash flow

•May need to educate lenders

S T R A T E G I E S F O R O P T I M I Z I N G F I N A N C I A LO U T C O M E S

• The cost of maintaining pension plans is rising dramatically• PBGC premiums rising to 4.4% of deficit plus $80 per participant• Effectively an annual “Tax” on the deficit and additional participants


Long termpool (LTP)

DB planassets

DB planliabilities

Investmentstress

Limit belowwhich covenantsimpacted

CurrentDCOH

StressedDCOH

© MERCER 2015 5

S T R A T E G I E S F O R M A N A G I N G I N T E R E S T R A T ER I S K


• Quantify interest rate risk• Evaluate enterprise-level interest rate risk

SOLUTION CONSIDERATIONS•Examine combined interest rate exposure at theenterprise level– including LTCP, pensionliabilities, and debt -- rather than in isolation

•Combined view can create greater cash flowcertainty, stronger balance sheet, more robustearnings stream

•Rising rates may adversely impact LTCP andservicing cost of floating rate debt, but pensionplan’s funded status improves

Long term pool DB plan deficit

Both decreaseunder risingrates scenario

© MERCER 2015 6

P L A N N I N G F O R C O N S O L I D A T I O N

Effectively use benefits andrewards to drive productivity,

budget, profits

Consider OutcomesBefore Design

Use qualitative and quantitativedata to make better benefits and

rewards decisions

Draw onMultiple Perspectives

Reward elements areinterdependent

Think Holistically

Benefits

Career Work/life

PayMoney Attraction Retention

Engagement Results

Employer EmployeeCost External

Retirement PlanReview

© MERCER 2015 7

H E A L T H C A R E C O N S I D E R A T I O N S

Consolidation FAQs:

• Why can’t we just merge all the plans?

• Why can’t we just terminate the plans andstart over with a new plan?

• What are the biggest challenges to benefitalignment within the healthcare landscape?

• What are the biggest benefits to alignment?


© MERCER 2015 8

H E A L T H C A R E S Y S T E M P O S T - M E R G E RO P P O R T U N I T I E S F O R C O N S O L I D A T I O N

403(b)

Affiliate 1Private not-for-profit

Non-electivecontribution


Match


Service-based matchand service-based

non-elective

401(a)

Affiliate 4Governmental

Match


Age-based non-elective and match

Lead EmployerGovernmentalNon-elective

457(b)

Affiliate 4GovernmentalFeferrals only

Affiliate 5GovernmentalDeferrals only

Lead EmployerGovernmentalDeferrals only

Pension

Lead EmployerGovernmental

Final average payOpen to newemployees


Final average payClosed to new

employees

• Sample health care system expanded through a variety of methods – acquisition,merger, management contracts, joint ventures

• Resulted in 6 organizations, 10+ retirement plans, multiple vendors and investmentlineups

• Goal to harmonize retirement plan benefits where possible to increase efficiencies


© MERCER 2015 9

H E A L T H C A R E S Y S T E M P O S T - M E R G E RR E S U L T S O F C O N S O L I D A T I O N

403(b)

Affiliate 1Affiliate 2Affiliate 3

Alignment ofvendors would

provide maximumadministrative

efficiencyAlignment ofbenefit types,

levels and vestingpossible

401(a)

Affiliate 4Affiliate 5

Alignment of vendorswould provide

maximumadministrative

efficiencyAlignment of benefit

types, levels andvesting possible

LeadEmployer

457(b)

Affiliate 4Affiliate 5

Alignment of vendorswould provide maximumadministrative efficiency

LeadEmployer

Pension

Lead Employer

Affiliate 4

• Plans within each type merge, but retain separate benefit structures and featureswhere necessary

• Provides administrative efficiencies (combined plan documents, plan forms, singleForm 5500 filing for non-governmental plans, single vendor, streamlined investmentopportunity)

• Assumes no compliance obstacles to mergers and non-governmental plans mustpass non-discrimination testing


© MERCER 2015 10

Effectively use benefits andrewards to drive productivity,

budget, profits

Consider OutcomesBefore Design

Use qualitative and quantitativedata to make better benefits and

rewards decisions

Draw onMultiple Perspectives

M E R C E R ’ S D C P L A N A P P R O A C HI N T E G R A T E W I T H P E O P L E S T R A T E G Y

Reward elements areinterdependent

Think Holistically

Benefits

Career Work/life

PayMoney Attraction Retention

Engagement Results

Employer EmployeeCost External

Retirement PlanDesign with PeopleStrategy

© MERCER 2015 11

P E O P L E S T R A T E G Y M U S T R E I N F O R C EB U S I N E S S A N D H E A L T H C A R E S T R A T E G Y

Prioritized choices aboutpeople investments whichenable the organization to

achieve its businessstrategy and performance

goals.

People Strategy

Defines the organization’sperformance goals; setsparameters for decisions

and investments tosupport those goals.

Business Strategy

Describes the market forhealthcare services in the

context of populationhealth, technology,

treatments, complianceand reimbursement.

Healthcare Strategy


© MERCER 2015 12

W O R K F O R C E I M P A C T O N C R I T I C A LO U T C O M E S

Anecdotes

Reactivechecks

Simulationsand fore-casting

Correlations

Benchmarks

On-goingreports

Causation

Data

Information

Insights

Predictions

Stories

Human Capital Analytics Maturity Curve

MostPowerfulMercer

operateshere


© MERCER 2015 13

I M P R O V I N G A L O W P E R F O R M I N G F A C I L I T Y( L O W E S T 1 0 % ) T O A M E D I A N F A C I L I T Y

Masked clientresults


© MERCER 2015 14

B E Y O N D P A T I E N T S A T I S F A C T I O N

Estimated changes in financial performance andimprovements in quality of patient care

Increase number of registered nurseemployees

Increase hours worked by agency nurses

– IMPACT +

Increase number of licensed practical nurseemployees

Increase employee tenure

Increase ratio of executives to totalemployees

Quality of patient careFinancial performance


© MERCER 2015 15

P U L L I N G I T A L L T O G E T H E R

E N T E R P R I S E - W I D EI N V E S T M E N T A N D

F I N A N C I A LS T R A T E G Y

1R E T I R E M E N T

P L A NR E V I E W

R E T I R E M E N T P L A ND E S I G N W I T H

P E O P L E S T R A T E G Y

SUCCESSSUCCESS

• Set investment/financial strategy holistically• Rationalize/update retirement plans• Integrate retirement plan design with people strategy

© MERCER 2015 16

Q U E S T I O N S ?

QUESTIONSPlease type your questions in the Q&A section of the toolbarand we will do our best to answer as many questions as wehave time for.

To submit a question while in full screen mode, use the Q&Abutton, on the floating panel, on the top of your screen.

CLICK HERE TO ASK A QUESTIONTO “ALL PANELISTS”

FEEDBACKPlease take the time to fill out thefeedback form at the end of this webcastso we can continue to improve. Thefeedback form will pop-up in a newwindow when the session ends.

Lori Wright, CEBSSenior Consultant,DC and Financial Wellness

Stefan Gaertner, PhDSenior ConsultantWorkforce Strategy

Michael Ancell, CFAHealthcare InvestmentsNational Segment Leader

© MERCER 2015 17

References to Mercer shall be construed to include Mercer LLC and/or its associated companies.

© 2016 Mercer LLC. All rights reserved.

This contains confidential and proprietary information of Mercer and is intended for the exclusive use of the parties to whom it was provided by Mercer. Itscontent may not be modified, sold, or otherwise provided, in whole or in part, to any other person or entity without Mercer’s prior written permission.

Mercer does not provide tax or legal advice. You should contact your tax advisor, accountant and/or attorney before making any decisions with tax orlegal implications.

The findings, ratings, and/or opinions expressed herein are the intellectual property of Mercer and are subject to change without notice. They are notintended to convey any guarantees as to the future performance of the investment products, asset classes, or capital markets discussed. Past performancedoes not guarantee future results. Mercer’s ratings do not constitute individualized investment advice.

This does not contain investment advice relating to your particular circumstances. No investment decision should be made based on this informationwithout first obtaining appropriate professional advice and considering your circumstances. Information contained herein has been obtained from a range ofthird-party sources. While the information is believed to be reliable, Mercer has not sought to verify it independently. As such, Mercer makes norepresentations or warranties as to the accuracy of the information presented and takes no responsibility or liability (including for indirect, consequential, orincidental damages) for any error, omission, or inaccuracy in the data supplied by any third party.

Investment advisory services provided by Mercer Investment Consulting LLC, formerly known as Mercer Investment Consulting, Inc. Mercer InvestmentConsulting LLC is a federally registered investment adviser under the Investment Advisers Act of 1940, as amended, providing nondiscretionary anddiscretionary investment advice to its clients on an individual basis. Registration as an investment advisor does not imply a certain level of skill or training.The oral and written communications of an advisor provide you with information about which you determine to hire or retain an advisor. Mercer’s Form ADVPart 2A & 2B can be obtained by written request directed to: Compliance Department, Mercer Investment Consulting LLC, 701 Market Street, Suite 1100,St. Louis, MO 63011.

MMC Securities is a registered broker dealer and an SEC registered investment adviser. Securities offered through MMC Securities LLC., MemberFINRA/SIPC, Main office: 1166 Avenue of the Americas, New York, NY 10036 Phone (212) 345-5000. Variable insurance products distributed throughMarsh Insurance & Investments Corp; MIIC Insurance Services in California, and Marsh Insurance Agency & Investments in New York.

I M P O R T A N T N O T I C E S

top health system investment issues in 2016 ... - mercer · pdf filetop health system...

Documents