HealthLeaders Media Finance - August 25, 2008 | Be Glad You're Not Running a Bank View as a Webpage | Subscribe for Free
Be Glad You're Not Running a Bank
Philip Betbeze, Senior Editor-Finance

You think healthcare's tough? Be glad you're not running any financial company, period. For all the challenges you face in running a hospital or physician practice, at least you're not dealing daily with the prospect that your company is insolvent, as many banks and other financial firms caught up in the credit crisis are. [Read More]
  August 25, 2008

Editor's Picks
McCain's healthcare plan: More radical than Obama's?
The most important question for readers of this newsletter isn't which plan is more radical, but which one is friendlier to their business prospects. McCain's plan is unquestionably more radical in that it will extend tax breaks currently enjoyed only by employers to individuals, allowing them to shop for more efficient insurance coverage. Short term, providers would likely be hurt from such a plan—especially those that haven't realigned to more consumer-friendly billing and collection tactics—because they will likely be forced to focus even more of their revenue generation activities to the individual. Collecting from many small customers is much more difficult that collecting from a few big third-party payers. However, this change is already occurring outside the legislative arena (see the Hartford Courant story below), as insurers gear up to offer multiple individual policies with myriad benefit construction. It would accelerate rapidly under a McCain plan. That means providers have to have ever more efficient automation to effectively and accurately charge and collect for procedures. The biggest question, of course, is whether either of the candidates can muster enough support for their respective plan to overcome the gridlock that seems to paralyze any non-incremental attempt at healthcare reform. [Read More]
More health insurers competing in the individual market
Some of the biggest potential for profit growth for insurers is in individual policies as employers continue to lay off workers and cut back on employee health plans. That means prices will come down as competition increases, but those people with pre-existing medical conditions will likely be losers in any shift toward individual policies, as insurers reject them in droves. There's no easy answer to this question of insuring those who are likely to incur large medical bills. Insurers turned down 11.3% of 1.55 million individual policy applications that were screened for health problems, which I think means any regulations that require insurers to accept all comers will require cost sharing that can only be achieved by requiring all adults to carry health insurance. [Read More]
New Jersey Blue Cross plans to go for-profit
Here we go again. After a few years' respite, it looks like another nonprofit Blue Cross plan is going to attempt to go for-profit. These are generally ugly battles, even though 14 former nonprofit Blues plans have done the conversion in the past couple of decades. Generally these conversions mean a sizable health foundation is created, but how that money is used post-conversion has a spotty track record. Executives generally favor these conversions, often for self-interested reasons, and the state's governor has gone on record as mentioning that a conversion might help the cash-strapped state find a way to pay for some sort of universal coverage initiative. With this announcement, the bell has been rung for round one in what's sure to be a big prizefight. [Read More]
Pennsylvania nonprofit plans to sell to Community Health Systems
These are typically difficult acquisitions to get through public opposition, but with more nonprofits facing tough financing challenges, not only in operating margins but also in lack of capital for improvements, look for more of these deals to go through. [Read More]
North Carolina Blue Cross Blue Shield hit with policyholder class action
This could be an ugly one for North Carolina's Blue Cross Blue Shield plan. A case against the insurer says the plan breached a contract with policyholders because after they reached the maximum benefit allowance, it effectively charged them prices that were as much as 50% higher than the insurer paid for the claims before the maximum was reached. Providers are not faulted in the suit because the issue results from list prices charged to Blue Cross regardless of the patient's maximum status. After the headaches providers endured from lawsuits against them over chargemaster list prices in the past few years, aren't you glad someone else is holding the bag this time? [Read More]
Finance Forum
Underpayments Continue With Transfer DRGs
In 2004, the Centers for Medicare and Medicaid Services instituted a "one-way edit protocol" for transfer diagnosis-related groups. CMS says "hospitals are responsible for researching their own claims, identifying underpayments, and correcting claims accordingly." As a result, prospective payment system hospitals may still be underpaid for transfer DRGs, says HealthLeaders Media contributor Bill Phillips. [Read More]
Finance Headlines
New York legislators negotiate $200 million cut to hospitals
New York Times - August 20, 2008
North Carolina hospitals vie for new beds
Raleigh News & Observer - August 20, 2008
439,000 more get health coverage in Massachusetts
Boston Globe - August 20, 2008
California bill would cap healthcare administration
San Francisco Chronicle - August 20, 2008
Los Angeles hospital CEO pleads not guilty to billing fraud
AP/Yahoo News - August 19, 2008
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From HealthLeaders Magazine
Help the Uninsured (Without Going Broke)
HealthLeaders August 2008 The number of people who can't pay much—or anything—for their care just keeps rising. Some hospitals have found new ways to help them while still protecting the financial health of the hospital. [Read More]
Money Talk

Scripps Health, San Diego
Rating: A1
Outlook: Stable
Affected Debt: $389 million
Agency: Moody's Investors Service
Remarks: Upgraded from A2 thanks in part to fourth consecutive year of strong operating income, including a 5.6% margin, and an operating cash flow margin of 10.2%. [Read More]
Audio Feature

Preparing for the RAC: This week, I spoke with Michael Taylor, MD, about the CMS Recovery Audit Contractor demonstration project. Though the RAC program has yet to be rolled out nationwide, it's coming soon, and hospitals will need to know how best to respond to an audit's findings. [Listen Now]