This panel discussion, featuring a panel of PNC leaders, will explore how rising interest rates and persistently high inflation could affect you and your practice moving forward.

Our PNC Webcast Panelists include:


Nick Spanakis, Executive Vice President and Group Manager for Specialty Business Banking


Gus Faucher, Senior Vice President and Chief Economist

Kevin T. Wills, CPA, CMPE, Sr. Vice President and Healthcare Territory Sales Mgr.,

Marc Dizard, Senior Vice President and Investment Regional Manager, PNC Private Bank®

Kaley Keeley, Senior Vice President and Territory Manager, PNC Organizational Financial Wellness


Webcast Transcript


Hello, everyone, and welcome to today's event titled, "Rising Rates and High Inflation: Three Actions Doctors Should Consider."

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Now, without further delay, let's begin today's event, once again, titled, "Rising Rates and High Inflation: Three Actions Doctors Should Consider."  I'd like to introduce you to your moderator for today, and that is Nick Spanakis, Executive Vice President and Group Manager for Specialty Business Banking.  Nick, the floor is yours.


Nick Spanakis:

Great.  Thank you. Hello, everyone, and welcome to PNC's webinar.  We're extremely excited to have you join us today.  As Ian mentioned, my name is Nick Spanakis.  I'm head of PNC's Healthcare Business Banking group, and frankly, as I've been speaking with many of our private practice clients across the nation, I realize that many of them have never had to operate recently or at all in a rising-rate inflationary environment.  Having served healthcare professionals for many years, I realize that boy, we're probably in a very good position given our years of experience, to share some learnings and best practices on what you could be doing proactively so that you can take advantage of the rising rate environment and inflationary pressures that you're under to prepare your practice, prepare yourself, as well as take care of your employees as you look forward.

I've always thought that being proactive in your planning starts with you having sound facts and insights that better inform your choices.  And our objective in today's webinar is to present you with some insights and some facts so that you can, in fact, make the right choices for your practice, your personal finances, and also taking care of your business' greatest asset, your employees.

Following our panel discussion today, we think you'll be able to apply these insights right away, and we stand ready to help.

I'll turn our meeting over to our panelists here in a moment.  I just want to introduce them up front.  We're going to have Gus Faucher, our Senior Vice President and PNC's Chief Economist, talk a little bit about the economy, what to expect there.  He'll lead over to Kevin Wills, who is our Senior Vice President, Healthcare Territory Sales Manager, who will take a few minutes to talk about the impacts and planning that you can put in place for your business needs and your practice.  He'll turn then to Marc Dizard, who will speak to what you could be doing on your personal side of the house.  And Mark is our Senior Vice President and Investment Regional Manager.  And then, we'll close with our panelist Kaley Keeley, who is responsible for PNC organizational financial wellness.  And she'll speak with some options that you might want to think about for your staff members.

And so, with that said, and without further ado, Gus, I'm excited to have you along with us.  And if you can lead us off from here, we look forward to hearing your comments.


Gus Faucher:

All right.  Well, thank you very much, Nick.  And so we are in a situation where the Federal Reserve is aggressively raising interest rates in an effort to combat inflation.  When the pandemic hit the United States economy, the Fed did what it could do to support economic growth.  It cut both short-term borrowing costs as seen by the blue line, and long-term borrowing costs, the orange line.  And those fell to record lows in 2020 and 2021.

But as the economy has improved, and in particular as inflation has picked up, the Federal Reserve has started to push up both long-term and short-term rates.  So we see interest rates rising throughout the United States economy.

The good news is, is that the economy continues to do well.  The labor market is very strong.  We've added about 400,000 jobs per month, on average, over the past few months.  And employment is almost back to where it was before the pandemic.  You can see that we lost about 22 million jobs in March and April of 2020, extreme job losses in a very short period of time.  But with very low interest rates, with Federal stimulus, with aid to households and small businesses, we've seen a very strong recovery in the labor market.  And at some point over the next few months, we should see employment return to its pre-pandemic level.

That being said, the labor market right now is very tight out there, and it's particularly tight in the healthcare industry.  This is the labor force participation rate.  This is the share of adults who are either working or looking for work.  And you can see, first of all, that that's been falling over the long run.  It fell from 2000 through 2020 because of the retirement of the Baby Boomers, and then it dropped dramatically with the pandemic as people dropped out of the labor force as COVID came to the United States.

Now, we've seen a recovery in the labor force participation rate since then, but it's still well below its pre-pandemic level.  Some of this is because some people took early retirement when the pandemic hit.  Maybe they were close to retirement age, were planning on working for a few more years, but decided to stay home instead.  Some of it is probably parents of young children who were dealing with virtual schooling or closed child care centers.  Some of it, initially, was due to the government benefits, initial unemployment insurance payments, stimulus payments, and so forth.  But those expired in September, and so we've seen people coming back.  But it is a structurally tighter labor market now than it was before the pandemic.  And what that means is, as a business person, you need to figure out ways to keep your current employees and attract new ones, because demand for labor is very strong out there.  The supply of labor is smaller than it was before the pandemic.  And this very tight labor market that we are experiencing in mid-2022 is not going to go away.

You can see that certainly, the healthcare employment is not back to where it was before the pandemic.  We had a big loss in healthcare jobs.  We've seen an improvement since then, but still, employment in the healthcare industry is still well below its pre-pandemic level.

We've also seen a strong recovery in healthcare spending.  Many people put off elective procedures or stopped going to the physician temporarily when the pandemic came to the United States, but obviously as people have felt the need to attend to their health needs, as we've seen support from the Federal government for the healthcare system, we have seen healthcare spending rebound.  And that is true even after adjusting for higher prices.  People are close to approaching the same level of healthcare demand that we had prior to the pandemic.

We have seen very high inflation in the United States economy over the past year or so.  As the economy has recovered, we've had difficulty with supply chains.  You can see the orange line, that is what we call core inflation.  That excludes food and energy prices.  So, very high inflation is not just higher gasoline prices; it's not just higher food prices.  It's throughout the economy.  It's for the goods and services that we buy, like education, like recreation, cars, travel, those types of things.  But what you can see is that healthcare inflation has actually been weaker than overall inflation.  So, while overall inflation is quite strong, we've actually seen a slowing in healthcare inflation over the past year or so.  And that does place many businesses in a difficult situation where their costs are going up but their revenues are not increasing as quickly.

PNC's baseline economic forecast is for continued economic growth in 2022, 2023 and 2024, but with a significant slowing in growth in the US economy.  The Federal Reserve is raising interest rates in an effort to cool off growth and bring down inflationary pressures.  This will lead to slower overall economic growth, particularly in interest-rate-sensitive industries like consumer durable goods, housing, and business investment.

The labor market, which is very tight right now with an unemployment rate of about 2.5% in mid-2022, will see a bit weaker job growth consistent with slower economic growth, and a gradual increase in the economic rate over the -- unemployment rate over the next year or so, to about 4%.  This will allow for a little bit more slack in the labor market and make it a bit easier for employers to hire.

Thank you very much for your time.  And with that, I'll turn it over to Kevin.  And what are you seeing from a practice management perspective?


Kevin Wills:

Thanks, Gus, and I really appreciate you setting such a solid foundation for us as we start the presentation today.  One of the interesting things is, you know, I think the signs of inflation are all around us in today's environment.  I'm sure you'd agree.  Most notably, from my side, I think consumers have seen costs of groceries and gasoline rise at rates that most of us haven't experienced in our lifetime.  Whether they've been visible or not, costs of running healthcare practices have also been rising along the way.  We all know that supply costs are up.  We know that retaining employees and recruiting new ones has led to increased staffing costs.  And really, all of this has put a lot of pressure on profit margins within the practices.  And quite honestly, it appears that these pressures may remain for the foreseeable future.

Here at PNC, we've been very active in regards to meeting with our clients to provide them with insights, and also to ask them how they've been adjusting during these economic times.  And for the next few minutes, I wanted to share with you what we've learned over the past few months.

First, what we've seen is a lot of practices have been assessing, reviewing and adjusting their fee schedules.  I know that many here at the webinar would agree that not all fee schedules are built the same, and that's really where the assessment comes in.  I think taking a baseline look at where you are with each payer in regards to the current fee schedule provides you really with a great frame of reference about what you may need to do with that payer going forward.  Ask yourself, are you able to deliver care and make a profit at the reimbursement rate that they're offering for particular billing codes or procedures?

It's certainly getting to a place where you can think about, are there adjustments that we can make in the way that you're delivering that care?  Is it possible to change up your staffing models in the office?  We know that these are all thoughts and processes that many practices are going through at the moment.

Quite honestly, we've heard from a lot of our clients that if the fee schedule doesn't provide for a profit margin; considerations around how many patients would be impacted if that plan were dropped all together; or more importantly, is it possible to go back and try to have a renegotiation conversation with those payers themselves.  I know there's probably a lot of eye rolls on the screen that this is a strategy that's certainly been tried over the course of time within healthcare.  But at the end of the day, I think hopefully insurers are aware of the fact that certainly the cost of providing care is up significantly.  Maybe there is a meaningful conversation that can happen there.

But I think one of the things that we've heard a lot of our practices really sharing with us frequently is the fact that they are absolutely increasing their fee schedule this year.  We know that although insurance, depending on your specialty of healthcare, we know that insurance and the payers are large sources of revenue.  We also know that self-pay or fee-for-service patients do make up some portion of that practice's payer mix.  And so I think regardless, every practice should take an assessment.  Even if that fee for service patient in the payer mix isn't gigantic, it is still essential for each practice to again go back and consider raising their fee schedule this year.

Certainly, as we think about different specialties within healthcare, whether that's on the dermatology or plastic surgery side where you have a lot of fee-for-service procedures that happen there, whether it's in the vet space, we know that they have way more control over the fee schedules that they charge.  And certainly, assessing that this year -- and if you haven't up to this point, we've heard a lot of practices that are taking mid-year increases in their fee schedule.

I think the other thing is to continue to keep an eye on those profit margins, and it is possible that you may need to implement another fee schedule possibly towards the beginning of 2023.  That's what we've heard from a lot of practices, as well as a lot of advisors that encircle those practices as well.

The next thing that we're looking at is really around, you know, as we think about the cash flow of the practice, capturing patient payments sooner and with greater confidence is incredibly important.  We know that most practices have that nice little sign near the front desk that alerts patients that payment is due at the time of service.  I'm not sure that you know, during different times within the economy, that every single office member of the staff has adhered to that policy as well in terms of collecting that payment.  I know that I've found myself being able to slip out not on purpose, but that no one was actually seeking to collect my payment when I was at the dentist or my primary care provider.

So I think one is, get on the same level as your staff, and make sure that everyone is adhering to that basic practice.  The moment that that patient walks out the front door, it sets off a chain reaction in terms of, you now have to invest additional time and resources of the practice for invoicing as well as collection of those payments.  So, make sure that not just that the procedures are there, but that they're being reviewed, and that it's a consistent focus of the practice, certainly at this point in time.

We know -- and I'm sure many of you that are listening to the webinar, that have been in healthcare for a long time, also know -- that the likelihood of collecting balances that are aged greater than 90 days decreases significantly once it hits that 91-day mark.  So, get the staff on board, provide a template of what the conversation can sound like with that patient so that it's a comfortable conversation for each staff member to have prior to the patient walking out.

The thing that I think we all need to embrace at this point, and not that it should have been different prior to this, but every dollar of revenue has to matter to everyone in the office.  And also, ensuring that each of those dollars actually makes it into the bank.  The reason that I say that second piece, is that we know based on Gus' opening comments, times in the economy are a bit strained at the moment.  And we know that inflation and what's happening can certainly cause economic hardship on everyone.  A byproduct of this that we're certainly seeing on our side is, there's been absolutely an increased incidence of fraud and embezzlement within our practice.

So, engage your advisors, and review your internal controls.  And not only just reviewing them, but becoming an active participant in monitoring those internal controls over time, is the best way to help prevent against fraud or embezzlement.  And when you think about that, every dollar matters.  I mean, you know, at the heart of it, any dollar of lost revenue is incredibly significant because the practice has already incurred all of the costs to deliver that care to the patient.

So just because you didn't collect from the patient, doesn't mean that you don't have to pay for the supplies that you use.  It doesn't mean that you don't have to pay those staff members.  It doesn't mean that you don't have to pay the portion of the rent that you pay every month to your landlord just because the patient chose not to pay you, or you were unable to collect.

As Gus mentioned, the labor market is tight, certainly within healthcare.  And we know that proactive strategies matter.  Review employee benefits being offered by the practice.  Are many employees participating?  I think that's a great baseline to start with.  If they're not, is there a way to get them more highly engaged in the benefits that are being offered, whether it's medical, whether it's the 401(k) plan, whether it's flex time, you-name-it?

The more that they're participating, the more likely that those employees are to stick with the practice for the duration of time.  We even see that here on the banking side.

I think another important thing that we're hearing from the practices, is that ensuring that their patient-facing employees are highly engaged in their roles, to ensure that they're providing the best patient experience possible.  You know, and I think one of the critical factors there is just being aware of the total number of hours being worked by each employee.  As we all know, burnout's real.  Again, I don't think there's a business here in America that hasn't experienced that, or maybe even worldwide.  Certainly with limited resources, more is being asked of each individual employee.  Let's try to keep them as happy and as fresh as they can, certainly for those employees that are in those patient-facing roles as well.

I think one way to help with that is refocusing staff on higher-value income-producing activities.  This is something that we've heard from a lot of offices.  We're seeing that there's a lot more being outsourced at this point in time.  I've heard of practices that historically -- it's still a head-scratcher for me -- that have done payroll internally.  I think the answer usually is, because that's the way we've always done it.  But now, we're seeing them being more open to engaging with a third-party payroll company or outsourcing it altogether.  We've seen outsourcing human resources function.

And I'm not advocating for outsourcing either of those, but I think as you look at the potential of leveraging other resources that are available to the practice, considering those things that will allow you to go ahead and refocus staff on actual higher-value, income-producing activities is incredibly relevant today.  Because again, we know that many practices are operating with a shortage of staff and those people are being asked to do more with less.  Let's take some things off their plate.  I think it could be incredibly helpful in terms of overall engagement within the practice walls itself.

And then the -- one of the important things now, as Gus had mentioned, too, we find ourselves not just in an inflationary period but we have rising interest rates as well on top of it.  It's certainly a critical time where you assess the balance sheet of your practice.  You start with your short-term debt structures.  This is an area where it's -- rates may rise.  They may continue to rise.  We've seen the Fed already take actions earlier this year.  The rates are up on the short-term side, 1.5%.  And each time that the Fed takes an interest rate increase, that certainly adjusts the prime rate as well.  And so, prime is up 1.5%.

And so what does prime affect?  Prime affects lines of credit, it affects any term loans that you have that are of variable rate.  It also affects credit cards.  So as you think about the way that the practice has utilized credit historically may not make sense going forward in terms of the structure that you originally put in place.  So again, getting with your close circle of financial advisors to assess your short-term debt, and while you're at it, you'll bring that long-term debt structure into play as well.

And if the practice does have long-term debt, I think the most important thing to look at now is, do we have any debt that's maturing in the next couple of years?  And if you do, is now the right time to go ahead and consider refinancing it?  Again, I'm here to say, yes.  As Gus said, rates have risen.  There is no doubt about it.  But I think hopefully Gus would agree that historically, we still see that rates are still historically low, even at this point in time.

So you know, my recommendation is, if you're going to adjust your balance sheet and look to kind of refinance your capital structure, or find the correct capital structure at this point, certainly on the long-term debt side look for banks that can lock you in for long-term rates, hopefully for the remainder of the life of that loan.

The one thing that I would steer any of my clients away from at this point is looking at loans that may balloon before paying off in full.  Again, we don't know where interest rates are going to go.  We don't know where they'll land.  We don't know if they'll ever be this low again.  And if we did, I think myself and Gus maybe retire by this point in time.  So there is no crystal ball.  We're just giving the best advice based on the information that we have at this point in time.

And as you think about not just the existing debt structure, we also look -- and what we're hearing from practices is -- that they are now assessing as we meet with clients, we talk about their 18-month, 3-year, 5-year plans.  They're now also assessing what their immediate plans are in terms of, what practice investments they want to make.  What we do know, and what we're hearing, not just from the practices but also their advisors, is that those investments need to drive an ROI and it's got to be relatively immediate.  Again, we're in a very tough period of shrinking profit margins, and so ensuring that any of those investments is able to produce a relatively immediate ROI and add hopefully, value again to the patient experience, is the win-win.  But look for things that can improve with efficiency, and sheer resiliency, and can certainly, if you were to stress test it out and take your worst-case scenario, assuming that that still drives a profit to the practice that's a great investment to make at this point.

And then, as you think about major projects in the future, do you have anything identified in the next 12 to 18 months?  Consider that timeline, right.  And there's a lot of factors that go into it, aside from the rising interest rate environment.  We have practices that, given today's environment, had been thinking about opening up another location, maybe going from one to two, or two to three.  Aside from the investment and the cost of ramp-up at this point in time, there's also staffing considerations to make.

And so I think all of those things taken as a whole just prove out the fact that we know now, more than ever, you encircling yourself with a great set of advisors and having frequent conversations is absolutely the best thing that the practice can do to ensure the financial wellbeing of that practice going forward.  And we also know that when the practice is doing well from a financial wellbeing perspective, it also leads over to the practice owners doing well on their personal financial wellness journey.

And speaking of that, I would now like to turn it over to Marc Dizard to discuss that topic.


Marc Dizard:

Yeah, Kevin.  Thank you so much.  I really appreciate it, and appreciate the information you shared.  Just as you alluded to, obviously it spills over into personal finances.  And we're quite the intersection, from a market perspective, of personal finances, and we're answering questions every day and working with our clients around, what should I do, what should I be thinking of, through a rising interest rate environment, through an inflationary environment.

So really excited to be able to speak with everyone on some of the things that we're considering.

So the slide that I've put up, it's something that we've done well before kind of financial markets have pulled back, and we're going to continue to do it.  But it's titled, "The Good, The Bad, and The Ugly" specifically for a reason.  And I bring it up that we've done this for a long time, because there are always things in financial markets that look good, bad, and ugly.

So I'm actually going to work in reverse order here a little bit and start with the ugly side.  And I'm not going to go through each one of these bullet points, just a few of the things that we consider.  And I want to start with the ugly, primarily because these are the things that typically impact markets, that you really can't build a portfolio around, nor would you want to try to.  They're usually external events that shock financial markets.  They're external things that are completely out of your control as an investor, our control as someone who participates in markets.  But, they do impact markets.

So obviously, the most notable that wouldn't have been on the list last year, that is on the list -- and at the top of the list -- this year, is the Russia and Ukraine conflict, which was something that obviously, we wouldn't want to predict or build a portfolio around.  But it is something that we saw early on in this year, really impact financial markets, and almost operate as a catalyst for some of the things that we're seeing in markets and hearing about today.

So if I move on from the ugly, I'll go bad, and I'll leave us on a good note.

So some of the things that are really important to markets and what's driving them right now, I'm going to start with volatility.  So, coming into this year, we talked a lot about volatility.  And volatility really just means that we're going to see movements in markets up or down that are a little uncomfortable sometimes, right.  They're not what you want to see in your portfolio.  Sometimes the pullbacks are a little more than what you anticipated.

Typically, when you have volatile markets and markets that are moving up or down quite a bit in a single day, those days tend to come together.  So you see some of the really bad days from financial markets where they sell off, and they're usually paired with some of the really good days that you don't want to miss as an investor because you'll permanently impair your portfolio results, possibly impair some of the things that you want to do with your goals and objectives in the future.  So, I point out as one of the bad things that we're seeing right now, is the volatility within markets.

And the other thing that I would point out is, we've seen the first bear market since we saw -- since 2020.  So this is when a market pulls back, and I'm thinking of the S&P 500 here, when it pulled back more than 20%.  And we haven't seen that in a couple of years.  Fortunately, we see some of the bouncing off of the lows.  We don't have that crystal ball, much like Kevin alluded to.  With the interest rate regime, we don't have the crystal ball for what financial markets bring.  But we can use some of the data and really remind people that in these types of markets, you want to remain invested.  Because you don't want to miss those good days, even though sometimes they're paired with some of those bad days.

The other thing that if I move to the top of the list in the Bad column, and I think we've talked about this already from Gus and from Kevin, is in fact the inflationary environment.  So investors have really been grappling with this, and it's a real -- and we've seen the divergence between what investor preferences really look like.

A lot of our high-growth-type companies, the names that you saw in the pandemic that were really the darlings of the market and moved a lot higher, are also some of the ones that are selling off the most.  And really, what investors are trying to grapple with when it comes to inflation, is, what does the high growth look like when you have to face inflation of, let's call it, 8.5% year-over-year?

And so, investors really look at that and say, do I want to pay for growth or would I rather pay for strong cash flows or for companies that can generate strong cash flows?

The other thing that goes really hand-in-hand with the inflationary conversation, is what's going on with the Federal Reserve.  And Gus mentioned it, with rates coming up.  And Kevin mentioned it with rates coming up.  That is something that is impacting markets.  So the Fed has really talked about and taken action this year, which has impacted financial markets and prices in financial markets.

They're essentially reestablishing what that risk-free rate looks like, and that's a really important factor when it comes to pricing financial assets and public company stocks, and looking at what you want to invest in, because as that resets investors have to rethink about what they want to pay for when it comes to their investments, what kind of earnings they want to pay for, and what does the future group of any company look like if they have to face a rising interest rate environment.  Would they really -- would they rather be investing in those companies that generate strong cash flow or those companies that are really generating the highest growth that we've seen more recently, before we saw the sell-off?

So it's causing investors to almost reevaluate their own risk tolerances, and reevaluate their portfolios with what they want to be invested in.

The last part -- and like I said, I'll end it on more of a good note -- is that good column.  So, with all that being said, and the ugly things going on in the market and the bad things going on in the market, I'd be remiss if I didn't point out that there are some really strong points, too.  So, one of the things is that while economic growth may be slowing, it is still positive.  And that's something that's really important to remind investors of, is that we are still seeing positive growth.  When you have kind of a reset from a pricing perspective in markets coming down, that also means that it's probably getting more in line with the economy.  So it helps shed a little bit of light of what's going to support the markets going forward, which hopefully does come back to what companies are earning.  And we can have some tangible fundamentals to make really good investment decisions off of.

The other thing that I would comment on is that second bullet point of improving equity, global equity valuations.  So the pain point of markets selling off is also a positive in the sense of what do the future return streams look like.  And this has a lot to do with when prices come down, the future return of your portfolio if you start investing now, can actually look much better than it did, I'll say, previous to a bear market where prices were much higher.

So when the prices come down, we actually see valuations a lot of time improve, so it really does play a good role in what future earnings look like or future returns could look like for portfolios if constructed well and making some wise investment decisions.

So the next part that I would like to leave everyone with is, what are some action items that you might be able to take, whether it be in your portfolio, your investment portfolio, or even just in your personal financial situation?  So the very first thing that I would remind everyone is, it's a great time to review what your portfolio allocations are as well as your risk tolerances, in context of what you want to achieve with your money.  So that's a really more complicated way to say that you need to align what your investments look like with your lifestyle, to see what you want to achieve in the future.

The other thing about this is, if you have investments, now is not the time to make wholesale-type decisions.  It's not the time to have emotional reactions to what markets do.  It is important to stay diversified and stay invested, keep that long-term time-frame for assets, because as we have seen in the past, markets tend to recover.  There is a light at the end of the tunnel in the future, and we don't want to lose sight of that and make decisions that could permanently impair those goals and objectives that you want to achieve with your personal money.

The other thing that goes hand in hand with that is, review your personal budget, or create a financial plan that helps you understand what the inflows that you get on a monthly basis as well as the expenses.  This is no different than what you would do on the practice side, except it's taking it to a personal level.  So this might -- you might want to improve cash flow, you might think about debt which we'll talk about in just a second.  But this is really the time to revisit some of those personal budget items and those financial planning items.

It's also important to remember to create a plan that pays yourself first, especially in the light of inflation.  Being able to save and have some accumulated assets to deploy, to invest, to think through that, is really important and will set you up for long-term success, and be able to hit your long-term goals.

And just like Kevin talked about, on the debt side, when you think about practice management and the balance sheet of your practice, it's also important to do that on the personal side.  So the interesting thing here is, it's not one way or the other, and it is a very personal kind of decision.  So I'd really encourage you to work with your PNC advisor when it comes to your personal finances to think through this, because everyone's situation is going to be different.  But some of the things to consider would be if you have variable-rate debt out there, obviously with the Fed changing interest rates, and the rising interest rate environment, that would be something to consider.  The other thing to consider would be anything that might be on a credit card, that you don't want -- obviously those are higher interest rates.  They are going to move higher, so you want to re-evaluate that in the context.

The one thing that we hear about from clients a lot is that a lot of folks strive to be debt-free, which is a great goal.  I would just caution against that, to manage through that in an inflationary environment, especially on low-interest-rate fixed debt.  The reason I say that is, you're actually owing less as the inflationary environment goes forward.  Because you -- if you think about it, if you took out a fixed-rate loan last year, you borrowed in yesterday's dollars and you're paying back in today's dollars, which year-over-year are again, about -- worth 8.5% less.  So it's actually a good strategy to think through that low-interest, low-fixed-rate-interest debt.  And maybe it works to your advantage to have that on your balance sheet, on your personal balance sheet.

So it's really something that you've got to work through on a personal level with your advisor, but it is something that you want to manage especially in light of rising inflation, rising interest rates.

The other thing, going back to investment portfolios -- and I commented on this, but I can't stress it enough -- is that you don't want to make emotional decisions with your portfolio.  Financial markets and investment markets are really challenging right now, and it's challenging to see, like I mentioned, the S&P 500 going into bear market territory and watching your personal portfolio go along with it to some degree.  But you want to avoid making those emotional decisions.

I would comment here, market volatility, although we haven't seen it recently in the sense that we've seen it -- we haven't seen it prior to the recent events that we've seen this year.  But market volatility is more of the norm than it is -- you know, it's not the exception to the rule.  It is, actually, the norm if you go back and you look throughout history.  So, the environment that we were in, that we had lower volatility, that was actually the exception.  So you want to really manage through that.  You don't have to make wholesale decisions with your investment portfolio.  It isn't cash, or be fully invested.  You want to work through that with an investment advisor to make sure that your allocations are appropriate and you can stay through these types of environments, as well as the growth environments, hopefully, in the years to come.

And then finally, I would just say, consider the timeline.  Pullbacks are healthy.  As I mentioned, it kind of resets valuations that you can actually have a better-looking rate of return hopefully in the future when that happens.  So it is important to think of, what is your time frame for the goals you're trying to achieve, and align your portfolio to go along with those to consider the timeline for your investments.

So with that, the last thing I'll say is, just like a business owner, employees of a business also feel the pinch of rising interest rates, rising inflation.  As Gus and Kevin spoke about, the tight labor market, and it's -- what we see in successful businesses is really highly engaged employees.  And a lot of times, that all starts with personal financial wellbeing.  So I want to turn our conversation over to Kaley Keeley from PNC's Organizational Financial Wellness to share some of her thoughts and strategies.  So, Kaley, please take it away.


Kaley Keeley:

Perfect.  Thanks, Mark.  You know, I think one of -- you know, you saw in one of Kevin's actions was around proactive staffing strategies and how much they matter.  So as Mark just referenced, I'm going to spend some time here talking about a practice's employees and their overall financial wellness.  You know, we know the majority of employees are financially stressed.  In fact, financial stress is often times the number one stressor for employees, more than health stress, job-related stress, relationship stress, you name it.

So we have five statistics listed here on this screen, but there's no shortage on stats that reflect how bad employees are feeling about their finances.  Overall, financial wellness has been declining since 2018.  It certainly was greatly impacted by COVID-19, and as you just heard the presenters here mention, by rising inflation.  Everything is costing more these days, from food, to gas, to homes.  So needless to say, there's a lot of work to do to get your employees, our employees, in a better spot financially.

We also know that financial stress impacts employee productivity at work, and as a result, is costing practices money.  It might not be as easy to calculate how much absenteeism, lower worker productivity, lower engagement or higher turnover, how much that's actually costing your practice.  But it is quantifiable, and it's a fairly significant cost.

We know that employees are also increasingly looking to their employers for these types of programs, particularly in your younger generations where you see a higher interest in benefits beyond traditional retirement and healthcare benefits.  Things such as budgeting, emergency savings, access to pay earlier, tuition reimbursement, and certainly within healthcare, student loan repayments.

Finally, we have seen more and more employers listening and feeling increasingly responsible for their employees' financial wellness.  Some of this is driven by the fact that employers recognize and understand that having employees struggle with finances impacts their bottom line, but much is being driven by the fact that practice owners care about and are concerned for their employees.  And overall, they want to retain those great employees over time.

So as a result, you've seen this huge influx of vendors into the financial wellness space.  So how do you choose one?  And so before I dig in around this, I do want to call out that improving financial wellness, it's hard.  Creating and sticking to a budget is no different than creating and sticking to a weight loss plan or any other behavioral change that someone is trying to make.  So these types of life changes can be really difficult, and certainly take time.  With that being said, we have identified three things that we believe make financial wellness programs successful.

And the first one, on the left here, is financial education.  Education alone isn't enough, but it is important to give your employees convenient access to it.  So this can be done on-site at the practice; it can be virtual, during business or after business hours; or perhaps it's digitally, right, which would allow your employees to go at their own pace.

It also needs to be broad, as your employees have different needs.  So, one might be approaching retirement while another one is just out of school and is faced with a mountain of student loan debt.  Sometimes, the employer and/or the employees just don't know where to start, so that's why you see assessment tools here.  They are very useful.  Practice owners can use them to understand which topics might be of the most interest to their employees.  And then employees can use them to figure out where they stand.  These same assessment tools can be used over time to help measure progress.

The last one here says it needs to be engaging.  The education experience itself needs to leave the employees feeling more confident and knowledgeable, as well as understanding what are the next immediate steps that they can take to help improve their overall financial wellness.

The second consideration here in the middle centers on the financial advice.  Mark spoke a lot about that for the practice owner.  You know, at the end of the day, providing the education will only take an employee so far.  They need access to the experts who will help them solve for and take actions around financial issues that they're facing today, while helping them prepare for their finances of tomorrow.

Similar to financial education, this access needs to be easy and convenient.  Employees need to feel like there is no barriers to them receiving advice.  There is a misconception that financial planning is reserved for those with dollars to invest.  The wealthy are perhaps just the practice owners.  But the reality is, is that most financial planning starts with the focus on the day-to-day, the cash flow management, as well as debt management.  But the important thing is, is that it's individualized for each employee and supporting their individual circumstances.

And again, it needs to be available to all employees, and not reserved for just a select few within the practice.

And then the final consideration, here on the right, is commitment.  And this really is a commitment to creating a culture of wellness inside your practice.  So, ensuring that your financial wellness program is integrated into your existing benefits platform -- employees want to be able to easily navigate to their benefits.  Therefore, even if the health and financial benefits are from different vendors, it's important to work to ensure that they don't feel like two separate and different experiences.

And as with any new benefit, you need to ensure that there's an ongoing communications campaign behind them.  You want to ensure that the employees understand and also value the benefits that are being provided to them, so communicating regularly and through different approaches will certainly help.

We strongly urge employers to identify -- to identify ways to entice employees to participate.  It should be no surprise that incentives, whether they're financial or non-financial, have been incredibly effective at driving broader participation within benefit programs.

As with any benefit, you will want to be able to measure the return on investment.  Just make sure that this goes beyond the financial impacts, and includes a more holistic view of the overall organizational impacts to your practice.  So, things such as the patient experience, or other key performance indicators that you might have.

And I'll leave you here with this last kind of slide.  So if you're looking for, you know, again, some kind of -- a quick list, or punch list of items, you can see them listed here.  The first step is to get your employees' feedback.  Most vendors, like PNC, will work with you to develop a survey or to host focus groups with your employees.  Even if you have done this in recent years, it's important to do it again and to do it annually.  We see the needs and the preferences changing over time, and what was once a highly-coveted benefit might shift to something else.

Next is, determine the desired business outcomes and find a vendor that offers the appropriate solutions.  And then finally, work to implement your financial wellness program, drive engagement, and measure results.  Just offering a financial wellness program is half the battle.

As I mentioned under commitment, it needs to become part of the culture and the practice, in order to be able to drive the engagement and ultimately those business outcomes that you hope to achieve.

So I will now pass it back to Nick to give us his closing remarks.


Nick Spanakis:

Yeah.  Thanks, Kaley.  I appreciate your comments.  And to the rest of our panelists, as well.  You know what, we do have some time for questions, and we have a bunch of them that have come in from the participants of our webinar today.  And so what I'd like to do, if you guys don't mind, is I'm going to probably pick one or two questions for each of you, to give you a chance to respond to some of our participants here live.  And then we can just maybe consider the rest that we don't get to, as a later deliverable, as a frequently-asked-questions document or something.

So with that said, Gus, how about if I -- just so I stick in order of our panelists, I'll start off with you.  We have a question coming from one of our doctors, where the doctor is saying, hey, you know, he's been in -- "I've been in practice for quite a number of years; I've been through a couple of economic cycles.  I'm concerned that we might be running into a recession."  What's your perspective?  What's the likelihood of a recession over the next couple of years?


Gus Faucher:

So certainly, the US economy is not in a recession in mid-2022.  A recession is when economic activity is contracting, when we see consumer spending going down, when we see employment falling, when we're seeing output of businesses decline.  That is not happening.  The economy is growing in mid-2022.  And I think given the current strong state of the job market, with 400,000 jobs being added per month on average, the expansion will continue at least through 2022.

We are in an environment of rising interest rates.  The Federal Reserve is attempting to cool off economic growth to bring down inflation.  And there is the potential for the Federal Reserve to overdo it, particularly given the Russian invasion of Ukraine, which has added to inflationary pressures in the United States.  At the same time, it's creating a drag on economic growth.

So I think the probability of recession in 2023 or 2024 is up to about 40% now.  That's certainly elevated.  It's about double what it was before the Russian invasion of Ukraine.  But it's certainly possible that the US economy can get through this difficult patch over the next couple of years without a recession, and that's our baseline economic forecast.


Nick Spanakis:

Great.  Thank you, Gus.

Kevin, a question your way.  One of our doctor listeners is saying, "Hey, you know, I've not really paid a lot of attention to collecting patient payments at point-of-service.  You mentioned that in your remarks.  I just trust the fact that my staff members are doing what they're supposed to be doing.  But help me understand, maybe give me a comment or two, on what other practices might be doing?  Perhaps it's time that I look a little deeper at alternatives."


Kevin Wills:

Great.  Yeah.  Thanks, Nick.  I think a lot of practices -- again, it starts with assessing what is the current policy of the practice, and then secondly, are the employees actually adhering to the policies themselves.  And so, making sure everybody's on the same page.  If it's not been something historically that you've put a lot of focus on, suddenly putting a lot of focus on it is probably going to drive the type of behavior and outcome that you're looking for at this point in time.

I think the second thing to consider is, certainly, as we think about lots of different generations that are going through practices today, and each of them having a preference around how they're making payments and sharing that the practice is set up to take payments in a variety of different formats.  You know, Zelle for Business is even out here in the marketplace now, Nick.  Obviously, card services have been around for quite a long time.  We've seen a lot of movement away from cash and check, but those are still present.

But certainly, meeting patients where they're at financially in terms of their method or preference of method of payment is certainly critical.  And even for those patients that are stepping outside of the practice, you know, we know with some of the younger patients today they're very digitally-inclined.  Many of them may not even have a checkbook.  So sending that physical invoice to that patient with only one form of remittance, which is, hey, here's our address, please send us a check when you have a moment -- you may be waiting a long time.  Because they don't even have a checkbook to go ahead and draft that upon.  So, ensuring that you've got digital capabilities, even potentially built into the website -- again, not saying that -- ideally you're getting 100% of patients to pay at the time of service.  But more important is ensuring that if a patient does make it out that front door without settling up for service that day, that they have a very easy method based on their preference, to getting that payment made on the first invoice that's received.


Nick Spanakis:

Great.  Yeah, thanks for your insights, Kevin.  I'm sure the doctor appreciated it.

Marc, over to you.  This doctor wrote on the chat box, "Hey, I like to think that I'm well-educated.  I'm a voracious reader.  I'm informed about many things.  But boy, this market makes it very challenging or presents a lot of cloudiness.  I'm not exactly sure how best to time my investments or even if some of my colleagues are saying I should be investing in bonds at this time because of the rising rates.  Any advice on market timing or bond investments from your perspective?"


Marc Dizard:

Yeah.  Nick, thank you.  It's a great question, and obviously an important one.

So you know, a couple of the things that I would say, I mentioned it -- you don't want to miss those best days in light of some of the worst days that are in the market.  So we've seen, time and time again, history has shown that timing the market is really difficult.  And not only do you have to get it right once, typically you have to get it right twice, right.  When am I selling out, and when am I going to buy back in?  And even if folks get it right once, they typically miss the second decision, either luck or skill, whatever you want to call it.  But they usually miss either the upside on the tail end of that.

So the thing that I would say is most important, is really to align what you're trying to achieve with your assets, with your money, with your investment portfolio.  You really want to accomplish that first, and define, what am I investing for?  Because without that kind of purpose around the assets, it's going to be really easy to find yourself in the position where you're trying to time it, which becomes the market event of what's going on this day or that day.  And it becomes less of the investment perspective that you're trying to achieve, that usually people are trying to invest for a specific purpose.

So I would say, try not to time it.  Try to make really good decisions around what investments you're in for what you're trying to achieve with your wealth.

The second part of that question, just around bonds, we get this quite frequently right now.  Because bonds lose some principal value typically in a rising interest rate environment.  So we have a lot of clients that ask us, well, should I be invested in bonds at all?

The thing that we would point to, I would point to, is that bonds typically have less volatility.  You see less of that dispersion between price from when you purchase it.  So it really does act as a good buffer in the portfolio to hopefully prevent some of those timing decisions that we were talking about in the first part of the questions.  You might not feel like you need to time things quite as well if you've got a well-diversified, well-allocated portfolio that does include bonds as well as stocks.

So again, it's very personal.  I would highly recommend, get with an advisor to break it down specifically what it means for each person.  Because they can help you through some of those decisions.


Nick Spanakis:

Great.  Thank you, Marc.

And Kaley, as I was scanning through all the questions, in addition to Gus, Kevin and Marc having a bunch of questions here that we won't be able to get to because of timing, there's just a whole bunch of them that are coming in around organizational financial wellness.  And I'm going to try to summarize a few of them, but there are several questions on the same topic, which is -- boy, you know, from an employee perspective, as a practice owner, wanting to take care of my employees is important.  People are paying up and taking my employees to their -- to a competitor's practice, so I want to do a better job of retaining them, so on and so forth.  So that seems to be a common theme I'm reading here.

And they seem to like the idea of a financial wellness program for their employees.  Most of them have commented that they haven't thoughof that before.  But the common question is, you know, are there any barriers that they need to be thinking of about ensuring their employees achieve real value from a program like that?  Any other barriers they need to be considering as they look at programs like you spoke about a few minutes ago?


Kaley Keeley:

No, great question there.  And I think, you know, often times the most common barrier that we see to employees engaging with a financial wellness program is just -- is around confidentiality.  So finance -- because finance is very personal.  Finances can be a very sensitive subject, right.  So, often times when we see employees not engaging with financial wellness benefits that are available to them, they're looking for some sort of reassurance, right, that the information that I am providing, right, through usage of this tool, by participating in this financial education seminar, like, how much of that information is going to I guess make its way back to my employer?  And some sensitivity around that.

So it's important that as you're working with a vendor, we want to make sure that we are providing that macro-level data back to the decision makers, to the owners, right, so that they can evaluate and measure the success of these programs, while also balancing that with the confidentiality and nature of the employees participating.

So again, most vendors that you work with will seek to do that, but that's typically the number one barrier that we see to employee participation.

Beyond that, and it's some of the things that I did touch on around communication as well as kind of incentivizing employees to participate.  I think both of those tools, if used well, will help drive the engagement for the financial wellness programs inside the practice.


Nick Spanakis:

Great.  Yeah, thank you, Kaley, for your insight there.  That's an interesting barrier, right?  As confidentiality, and I'm glad that you're able to share your thoughts there.

So to our listeners, we're nearing the end of our time today, and I really appreciate each one of you joining in and listening.  As the economy unfolds, it's really important that you plan forward.  And I'm glad that you joined us today, because it tells me that you, too, believe in planning forward.

I would tell you from experience, though, planning alone won't get you there. You really need to be taking action against those plans, and monitoring the actions that you've taken, the choices that you've made over time, to ensure that you're deriving the outcomes that you desire or that the choices you made are keeping up with the ever-evolving marketplace.

In my opinion, you owe it to your patients to run a healthy practice.  In doing so, thinking about financial wellness is important and it requires you to be proactive in not only preparing your practice but also your personal finances, as Mark spoke to, and putting the right measures in place to ensure the stability of your staff as Kaley indicated, as well.

Over time, Kevin and I have spoken quite a number of times about some learnings that we've achieved in working with our clients across the nation.  And we've learned that our most successful healthcare practice owners do engage a team of healthcare professionals.  And I think you somewhat heard that from each of the panelists today, that engaging the right financial partners, engaging the right tax and accounting advisors, engaging the right healthcare consultants or healthcare law firms, is appropriate. And you owe it to your patients and to yourself to wrap yourself around, be wrapped around by these trusted advisors, trusted professionals, that specialize in healthcare.

So let me wrap up our call at this point.  I want to say thank you to our PNC panel of experts, Gus, and Kevin, Marc, and Kaley, for your thoughtful insights, for the punch lists that you provided.  I also want to thank each one of you for listening today -- our healthcare professionals -- for your trust and your confidence in PNC Bank, and PNC Healthcare Business Banking.

I appreciate each one of you joining today.  Thank you again.  Ian will close up our webinar today with some closing remarks and an opportunity for you to provide feedback to us, via a survey.

So, Ian, do you want to take us from here and close us out?



Okay.  Thank you so much, Nick, and thanks to all our presenters today.  As Nick pointed out, there is a survey that will be available on your screen after the event's conclusion.  If you could please fill that out, that would be greatly appreciated as that will help us out on future webinars.

We hope you found today's information useful and informative, and have a good rest of your day.