NYU Langone Health turns to US Treasury bills following bank failures

Silicon Valley Bank’s (SVB) collapse in March prompted some health systems to examine their risk for potential bank failures.

NYU Langone Health started diversifying its portfolio and buying US Treasury bills, according to its quarterly report for the nine months that ended on May 31.

“While concerns of a broad banking crisis have diminished, NYU Langone Hospitals continues to maintain a laddered portfolio of US Treasury bills to supplement its bank deposits and to support operating cash flows,” according to the report.

US Treasury bills are low-risk short-term securities that mature in a year or less and are backed by the “full faith and credit” of the US government, according to the Treasury Department. Investors such as health systems can purchase the bills at a discount, and once the bills mature, can redeem them for face value.

Two days after SVB’s closure, the New York State Financial Services Department closed Signature Bank due to “problems with the New York bank’s liquidity,” the Wall Street Journal reported. Both banks held a large number of uninsured deposits—the Federal Deposit Insurance Corp (FDIC) insures up to $250,000 per depositor—and “experienced a decline in deposits” in the months preceding their collapses, per NYU Langone’s report.

At the time of the closures, more than 50% of NYU Langone Health’s cash was held in “large, credit worthy, money center banks” and its balances were over the FDIC’s insurance limit—making them susceptible to another bank failure, according to the report. The hospital didn’t immediately return Healthcare Brew’s request for comment.

NYU Langone Health is not alone in its concerns. A bank failure could push a hospital to close its doors, especially if it’s “already in a precarious financial situation,” Becker’s Hospital Review reported.

“We probably had 2% of our cash in the bank as uninsured. So that’s $20 million or $30 million of uninsured deposits,” Gregg Ferlin, senior finance VP and CFO of Indiana-based Community Healthcare System, told Becker’s. “But in the scheme of things, it’s not going to be devastating for our health system or many health systems with strong balance sheets. It could be more of a risk for the health system that’s running on the edge or critical access hospitals.”

Is your health system reconsidering its risk for potential bank failures? Email Kristine at [email protected]