HealthLeaders Media Finance - February 9, 2009 | Are You Being Pound Foolish? View as a Webpage | Subscribe for Free
Are You Being Pound Foolish?
Philip Betbeze, Senior Editor-Finance

You've been hit with huge investment losses, a lack of access to capital, and rapidly declining volumes. It's hard to deal with that level of triple-witching that so quickly soured good economic times for the industry, but you aren't standing idly by. I'm concerned, however, that organizations are cutting too deeply. You should act quickly to contain the financial damage during any business downturn as drastic as this one seems to be, but be careful not to destroy any hope of recovery should the business climate turn around as quickly as it soured. [Read More]

  February 9, 2009

Editor's Picks
Two hospital systems expand networks in tough times
Lifepoint Hospitals and Community Health Systems, whose headquarters are just miles from HLM Finance's doorstep, have made hospital acquisitions in the past week, perhaps starting the ball rolling in a market that favors strategic acquirers over the leveraged acquirers that have dominated the healthcare M&A marketplace over the past couple of years as valuations skyrocketed. Now, such for-profit acquirers like Lifepoint and Community have the advantage, and they appear to be striking on those opportunities. Lifepoint paid $80 million for Rockdale Medical Center, in Conyers, GA, and will invest $30 million to upgrade medical equipment and computer systems. Community will lease Siloam Springs Memorial Hospital near Fayetteville, AR, and will build a new replacement hospital there within four years. I wrote about these for-profit-nonprofit partnerships recently in HealthLeaders magazine incidentally. [Read More]
A more rational approach to hospital pricing
Here's another entry from uber-healthcare economist Uwe Reinhardt. If you remember from last week's issue of HLM Finance, Reinhardt offered a primer on how hospitals are paid currently. In this blue-sky exercise, his sobering analysis concludes that a system by which a single payment takes care of a single medical condition is at least 10 years in the future. As a step toward a more realistic goal, Reinhardt argues that there are worse ways to take steps toward reform than borrowing Medicare's pricing model, in which an entire inpatient episode of care is paid for at one price, rather than using the current fee-for service model that dominates commercial transactions. If it were to happen, it seems to me that Medicare and Medicaid would have to make up the difference because hospitals currently subsidize Medicare to a slight extent and Medicaid to a big extent, with commercial rates. Reinhardt addresses that in his proposal, but I'm curious what hospital executives make of his plan. In any case, it seems much better than the current mishmash. [Read More]
New Orleans' Touro, St. Petersburg's Morton Plant work on tie-ups with children's hospitals
What we have here is a couple of interesting stories on tie-ups between acute-care hospitals and children's hospitals in their respective areas—one in St. Petersburg, FL, and one in New Orleans, and both were announced in the same week. I'm wondering if this marks the start of a trend. In an era where the experts are all telling us to expect a wave of consolidation in the hospital industry, I have to admit I wasn't envisioning the combination of acute-care hospitals and children's hospitals—only because there are a lot of differences between them operationally. It will be interesting to see whether similar organizations in other cities follow the lead of Touro and Morton Plant.
CEO of Nashville-based Saint Thomas Health Services resigns
Physician leaders questioning Jim Houser's leadership have called the Nashville-based Saint Thomas Health Services' chief executive a victory. It's unclear, however, whether a shift at the top will soften potential budget cuts that have some doctors concerned about the future of its four hospitals. In casting no-confidence votes against Houser's leadership less than two weeks ago, medical staff leaders at three of those hospitals raised concerns about how proposed budget cuts and a move to a more centralized management could affect patient care. [Read More]
RAC Protest Resolved: CMS to Continue RAC Program Implementation
A stop work order has been lifted and CMS' permanent RAC program is once again underway. According to CMS officials, the RAC bid protests filed by Viant, Inc., and PRG Schultz, USA, Inc. were resolved on February 4. As a result of the protest settlements, the already chosen RACs will be subcontracting with both PRG-Schultz and Viant. [Read More]
Finance Forum
Receiverships: A Practical (and Perhaps Less Expensive) Alternative to Bankruptcy
As credit markets remain tight and more defaults by healthcare companies occur, secured creditors look for less expensive alternatives to bankruptcy. An alternative to the lengthy and expensive process of bankruptcy is the state law remedy of receiverships. This article examines the pros and cons of such an approach. [Read More]
Finance Headlines
As nominee trips, healthcare drive suffers a setback
New York Times - February 3, 2009
Seattle's Swedish to lay off 200
Seattle Post-Intelligencer - February 3, 2009
Survey: Recession hits Georgia hospitals hard
Atlanta Journal-Constitution - February 5, 2009
Obama signs SCHIP bill - February 4, 2009
Doctor-owned hospitals win with SCHIP bill
Wall Street Journal (blog) - February 4, 2009
No end to the battle of beds in North Carolina
Raleigh News & Observer - February 4, 2009
North Carolina state health plan needs $1.2 billion
Raleigh News & Observer - February 4, 2009
Inova competitor loses battle to build Virginia hospital
Washington Post - February 3, 2009
Proposal makes UConn Health Center, Hartford Hospital partners
Hartford Courant - February 4, 2009
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From HealthLeaders Magazine
Flat-World Healthcare
HealthLeaders August 2008 Globalization is no longer an uncertain trend in the distant future. U.S. providers must refine their organizational strategy to compete in a marketplace that is broader than ever before. [Read More]
Service Line Management
A Spinal Shift
As minimally invasive procedures consume a larger portion of spinal care, provider organizations have many opportunities—and challenges—in an increasingly outpatient service line. [Read More]
Money Talk

Carroll Hospital Center, Westminster, MD
Rating: A3
Outlook: Stable
Affected Debt: $124 million
Agency: Moody's Investors Service
Remarks: Upgraded from Baa1 to A3 thanks in part to a leading 55.6% market share in rapidly growing Carroll County, MD.
[Read More]
Audio Feature

Making the Financial Case for the Medical Home: Geisinger Health System's Ron Paulus and Kevin Brennan discuss the medical home goal that has eluded healthcare for years. Geisinger has developed a financial model that they think will work for a medical home going forward—one that includes a warranty for patients and an all-inclusive cost for care.
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