Medical banking wrinkle: Cooperation, not competition

A sound banking relationsip--even better, a team--can make a big difference for community medical services.

Healthcare institutions are truly community assets for the regions they serve. Given the importance of hospitals and other health systems to the local quality of life, it is critical for banks to be actively engaged with healthcare providers and work with them to meet their unique and intense demands for capital.

Booming business

As much as we already depend on these community institutions today, Americans' reliance on the healthcare system is increasing exponentially. Baby Boomers are now the largest cohort of people in our population. Their first wave has entered its sixties. As the healthcare industry adapts to an aging population that is living longer than previous generations, it must do so in a continued challenging environment.

Moody's Investors Service reported earlier this year  that the outlook for the not-for-profit healthcare sector continues to be negative, as is has been since 2008.

So, healthcare institutions, like so many organizations, have to do more with less. They have had to balance the high cost of new technologies and infrastructure upgrades in order to deliver specialized care to a population that's living longer. Yet they do so with reduced government support, changes to payment and insurance, and a continued negative economic environment.

And as healthcare providers across the country prepare for policy changes, including the Patient Protection and Affordable Care Act, or Obamacare, there will be a great deal of change in this industry in the next three, five, and ten years.

Best assistance targets task, not other banks

By the nature of their work and infrastructure, healthcare providers have the need for continuous capital, in order to ensure they have the technology, facilities, and trained professionals to provide top-level care for their patients.

From refinancing a loan to help a hospital reduce its annual interest expense, to financing mandated technology upgrades to house medical records, or funding construction to reconfigure an outdated skilled nursing, or operating room model, there are many ways that banks can support the healthcare industry, thereby supporting the communities we all live and work.

When you're looking at a prospective healthcare client, the goal should not be to unseat a bank it currently does business with, especially if the bank has been a good capital partner in the past.

The goal should be find a secondary capital source to complement that existing bank relationship.

This may seem against competitive practice, but consider the argument:

The fact is, given the size and capital intensity of major healthcare institutions, no one bank can (or wants to) handle all the credit needs of a facility. This is one area where banks should, and many do, set aside competitive differences and collaborate to ensure these healthcare providers remain strong assets to our communities well into the future.

Cooperation over competition is possible

Working alongside a "competitor" with extensive healthcare lending experience, a bank can better manage credit risk. This ensures that their local hospital or other provider can avail itself of a full range of financing options.

And, if a bank doesn't have dedicated and experienced healthcare lenders on its commercial lending team, partnering with a bank that does is key to properly underwriting and managing healthcare credits.

For example, our bank was pleased to serve as a secondary lender for a not-for-profit continuing care retirement community (CCRC), which has cared for eastern Connecticut seniors for more than a century. When the CCRC needed to expand and update its independent living facilities, the not-for-profit wanted to supplement its longstanding bank with a healthcare lender that understood the needs analysis for the new housing units and the complexity of collateral sharing with another financial institution. Working alongside the incumbent bank, we were proud to be able to lend more than $13 million for the beautiful addition to the senior living campus that recently opened its doors and fills a vital need for the elderly in that community.

There is ample opportunity right now for banks of all sizes to play a role here, as long as they dedicate resources, talent, and capital to supporting these community assets, and do so in a collaborative spirit with their local competitors. Lending with a healthy community in mind is going to help make our economy healthier in the long run, too.

About the author

Matthew Huber is a First Niagara Bank, N.A., senior vice-president leading the $37 billion bank's healthcare lending across the Northeast. Mr. Huber joined First Niagara in 2009 to begin and lead the commercial healthcare efforts focusing on commercial and real estate lending to all facets of the healthcare Industry.  Prior to joining First Niagara, Huber was a senior vice president and regional manager of KeyBank Real Estate Capital's Healthcare Group, where he led a team of relationship managers and portfolio managers providing financing, banking, and investment solutions to healthcare clients throughout the Northeast, Mid-Atlantic, and Midwestern states. Huber started his career in the commercial middle market of M&T Bank where he became an industry expert lending to the healthcare industry.