HealthLeaders Media Finance - September 15, 2008 | Warning Signs View as a Webpage | Subscribe for Free
Warning Signs
Philip Betbeze, Senior Editor-Finance

Healthcare is a tough market to stay ahead of, analysis-wise. Hospital and physician practice leaders are dealing with some of the same headwinds the rest of us are facing: higher gas prices, inflation, rising wage pressures—not to mention bad debt. Conflicting headlines render the financial future of healthcare uncertain. With the lack of a clear financial direction for the industry as a whole, I thought it might be helpful to check some of the recent headlines, good and bad, and how they portend for the healthcare industry. [Read More]
  September 15, 2008

Editor's Picks
States lobby Congress for Medicaid relief
I've heard nothing else more frequently in my recent interviews with hospital CFOs than the fact that Medicaid is really hurting them. That's not new, but coupled with other financial stresses like higher co-pays and coinsurance costs as well as the increased cost of collecting smaller bills, it's really causing a lot of problems for hospitals financially. I talked to a CFO in Alabama yesterday who estimates Medicaid covers only about 40% of his hospital's costs to treat patients covered by the state reimbursement mechanism for the poor. Are we finally pushing up against the glass ceiling that allows hospitals to absorb Medicaid losses with so-called cross subsidies? It certainly seems like it. I'd love to hear from any hospital CFOs who are experiencing extreme stress primarily due to Medicaid. [Read More]
Grady CEO takes hands-on approach to follow money
Michael Young is getting down and dirty with the money. As the new CEO of Grady Hospital in Atlanta, he's already spent hours scrutinizing every check over $1,000 the hospital has issued recently. It's a weekly—and decidedly non-CEO-like practice—he started even before he was named to lead the troubled hospital, which lost around $40 million last year. When you click through to read this story, make sure you read to the end. The "money quote" is the last sentence, so I'll preserve the surprise. [Read More]
Traveling for care-in the U.S.
When we talk about medical tourism, we're almost always talking about traveling for care outside the United States. After all, the bargains are much more stark. However, a trend that's traveling under the radar involves insurance companies sending patients elsewhere in the United States to take advantage of geographical variations in cost and quality. Several employers are finding that hospitals are matching overseas discounts in pricing, especially for common procedures like knee and hip replacements. [Read More]
Provena hospital to take taxation case to state supreme court
Provena Covenant Hospital must be tired of the back-and-forth. After yet another setback in its quest to free itself from state agencies and courts that want to tax it for not providing enough charity care to justify its tax exemption, the hospital's parent is taking the next logical step: arguing before the Illinois Supreme Court. Given the twists and turns this saga has undergone over the past four years, don't be surprised if we see this one being argued in Washington in the next few years. [Read More]
Cleveland Clinic's success continues to be a boon for region
Internationally known as a cutting edge healthcare provider, Cleveland Clinic isn't content to sit twiddling its thumbs in response to competition. I remember a visit there a few years back and it seemed like construction was in overdrive even then. But a new heart center that hadn't even broken ground at that time will open soon and add 100 beds and 1,000 jobs to the campus. Cleveland Clinic knows what it's doing businesswise. It made a 7.3% margin on $4.8 billion in revenue in 2007. [Read More]
St. Louis's BJC opens its books
We have here an interesting one-on-one interview with the CEO of the dominant healthcare provider in St. Louis about its finances. Interestingly, among other tidbits, it takes a look at the profit forecast for a new hospital the nine-hospital nonprofit chain built that doesn't project a profit until 2014. It lost nearly $19 million its first year. That shouldn't be a cause for concern, says writer Mary Jo Feldstein, as the system's billions in reserves should cushion any operating losses at the hospital for years to come. [Read More]
Finance Forum
Where to Start with Federal Healthcare Contracting
Every day, federal agencies quietly announce grants and other competitive bidding opportunities for almost every different kind of medical specialty and subspecialty. These kinds of solicitations present attractive opportunities for providers in all areas of the healthcare industry and in all parts of the country. Collectively, they represent billions of dollars of opportunity annually. But ironically, the vast majority of them will go unnoticed. [Read More]
Finance Headlines
Cape Cod Healthcare's credit rating lowered
Boston Globe - September 10, 2008
New Jersey Blue Cross may cut Philadelphia hospitals from network
Philadelphia Inquirer - September 11, 2008
Settlement requires former United Health head to pay CalPERS $30 million
Sacramento Bee - September 10, 2008
Campaign collecting funds for new Chicago children's hospital
Chicago Tribune - September 11, 2008
End of federal Medicaid subsidy could cut 18,000 in Minnesota
Minneapolis Star-Tribune - September 11, 2008
Parkland kicks off first capital campaign
Dallas Morning News - September 11, 2008
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From HealthLeaders Magazine
10 Events That Could Change Healthcare
HealthLeaders September 2008 No one knows what the future holds, but several scenarios could significantly alter the healthcare landscape and pose formidable strategic, financial, and clinical challenges for senior leaders. Get ready. [Read More]
Money Talk

Banner Health, Phoenix, AZ
Rating: AA-
Outlook: Negative
Affected Debt: $913.4 million
Agency: Standard & Poor's
Remarks: Though Banner is the clear market leader in Phoenix and in its Colorado markets, increased debt and balance sheet stress led to outlook revision from Stable. [Read More]
Audio Feature

Challenges in Finance: This week's audio file is a recent conversation I had with Stephen Farber, former Tenet Healthcare chief financial officer, about CFO challenges, hospitals potentially using credit scores to deny care, and the biggest challenges to revenue cycle improvement. Now chairman and CEO of Connance, which helps hospitals recover patient revenue, Farber had some interesting answers, to say the least. [Listen Now]

September 25, 2008: Service Line Strategies Workshop 2008: Cardiovascular
October 7, 2008: Physician Compensation Planning: Key Techniques for End-of-Year Evaluations
October 21, 2008: Move Now or Suffer Later: Lessons on Giving Patients Price and Quality Data
October 28, 2008: Case Studies in ER Marketing: Three Targeted Efforts That are Getting Results
On Demand: Marketing Obstetrics: Strategies for Service Line Campaigns
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