Archive for May, 2011

How healthcare in the U.S. does not follow the free market principles

The business of healthcare delivery is one of the most difficult and complex businesses to operate. This is especially true for hospitals and healthcare delivery systems (a combination of hospitals and healthcare delivery services (e.g. surgical centers)).

While we are all concerned about the availability, quality and affordability of healthcare services, the vast majority of not-for- profit hospitals, continue to lose money on an annual basis or survive on razor thin margins. These hospitals represent 58% of healthcare systems in the U.S. (American Hospital Association) These organizations teeter on the precipice of financial failure relying largely on charitable contributions and their endowment funds. These additive sources of income keep the doors open and buffer hospitals from larger financial losses. With challenging economic times, these sources of supplemental income are reduced.

So why is one of the most demanded and largest industries in our country struggling to …

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34 Billion

The Federal government has committed more than 34 billion dollars to improving the nation’s Health Information Technology (HIT) Infrastructure. The goal is to have an interconnected network of EHR systems that can exchange information with hospitals, pharmacies, health insurance companies, public health, and other entities. This Health Information Exchange (HIE) should allow the necessary patient information to flow through our health system in an efficient manner to improve the patient’s quality of care.

This sounds great but how do we get there? Many physicians have concerns about cost. CMS has developed incentive programs to give physicians up to $64,000 to adopt EHRs and become meaningful users of the technology. Is that enough? One would think that it certainly should help relieve the cost burden that providers have to bare. However, there are many other concerns such as security of the information. Who is actually going to have control of all this data? Many technology …

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The Changing Health Care Delivery System

The pace of change in the health care delivery system in Georgia and in the nation has been rapid and is likely to accelerate in the next decade. The places where we purchase health care, the people who provide the care, the types of health care available to consumers has all changed in the last 20 years. These changes resulted directly or indirectly from attempts to control the rate of health care inflation. Despite these changes in the structure and delivery of health care services health care cost inflation has averaged more than twice the rate of general price inflation in the last twenty years.

Rising health care costs have increased the number of Georgians without health insurance while the increase in the uninsured has made the burden of those health care costs more uneven. In the last decade the percentage of Georgians with private coverage has declined from 76 percent to 62 percent, while the percentage who are either uninsured or on public coverage has increased by a …

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Why is Meaningful Use Meaningful to Healthcare Providers

The American Recovery and Reinvestment Act of 2009 (“ARRA”) provided over $2 Billion Dollars in financial incentives to motivate hospitals and physicians (“Providers”) to adopt the Electronic Health Records (“EHR”).  The incentive money was designed to encourage Providers to purchase, adopt and more importantly implement the EHR to improve the overall quality of care, reduce medical errors and improve the clinical care coordination between Providers.  In order to ensure that Providers are using an EHR system to achieve these goals, the Providers are required to report on specific measures. 

The measures focus on (1) improving quality, safety, efficiencies and reducing health disparities, (2) engaging the patients, (3) improving care coordination among providers, (4) improving public health; and (5) ensuring privacy and security protections of patient information.  Upon achieving these measures, the Provider can attest to the government that they are a “meaningful user” and …

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The Hidden Costs of Healthcare

We’ve all seen news reports of escalating healthcare costs and likely felt the implications of those spiraling expenses. Employers are shifting more costs to employees.  Many smaller companies are scaling back health coverage or dropping benefits entirely.

But there is a hidden cost of healthcare that no one wants to talk about and it’s one you’re going to start hearing more about: defensive medicine.

In healthcare, there can be “side effects” of medical procedures or prescription drugs. And, there is a rather significant “side effect” from the failure to do something about nuisance lawsuits filed against physicians. That side effect is called “defensive medicine.”

So we are clear, when physicians practice “defensive medicine,” they usually order unnecessary tests or procedures just in case they get sued.  According to a 2010 survey of physicians by Gallup for Alpharetta-based Jackson Healthcare, one of every four dollars spent in health care goes to defensive medicine.

The …

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What Consolidation Means for the Future of Healthcare in America

In thinking about the most relevant topics for today’s healthcare industry, the two issues that practically every healthcare executive and industry stakeholder that I speak with want to hear about are:  (A) healthcare reform; and, (B) consolidation.  While the focus of my work relates to consolidation, specifically meaning mergers and acquisitions between healthcare businesses, these two important topics are certainly not mutually exclusive of each other, because the former indeed plays a significant role in fully understanding the latter.

Being an investment banker that works exclusively with healthcare organizations, consolidation (i.e., mergers and acquisitions, financings, transactions, etc) is what I focus on every day.  My job is to advise various types of healthcare entities through a transaction process, whether it is assist with an acquisition (”buyside advisory”), facilitate a sale (”sellside advisory”), work with lenders to facilitate capital or restructure an …

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Reaching Today’s Do-it-Yourself Consumer

Today, with the rise of social media, mobile devices, digital-wireless connectivity, as well as other emerging technologies, our culture is changing more than ever before. And consumers are changing right along with it. Look no further than the emerging trend of the “self-service consumer.”

Increasingly, consumers are developing a do-it-myself mantra: trading stocks online, self  check-out at the grocery store, self check-in at airports and ATM banking, to name a few.  And understanding how to communicate and engage with this self-service consumer is crucial for the healthcare and wellness industry.

This emerging empowered self-service consumer is also transforming the healthcare industry, as consumers utilize self-service technology to expand their healthcare access, knowledge and empower them to put healthcare in their own hands.

The industry needs to take note of this trend. It’s not a fad; it’s here to stay. The current healthcare environment—culturally, politically and …

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Passing the Bill so that You Can Find Out What Is In It

Historically, the Internal Revenue Code has provided no specific standards for hospitals to satisfy in order to obtain tax exempt status.  Instead, hospitals have obtained tax-exemption as a derivative of the general charitable purpose of serving those in need. Since 1969 the IRS has recognized the promotion of health as a specific charitable purpose. However, now as a result of the enactment of healthcare reform legislation, hospitals must satisfy certain statutory requirements to obtain and maintain tax exempt status.

The Patient Protection and Affordable Care Act contains four specific requirements that hospitals seeking tax exemption are or will be required to meet.  One of these requirements, related to conducting and implementing a community health needs assessment, is phased in to law over a three year period. The other three requirements take effect for taxable years beginning after March 23, 2010 (the date of enactment).  Essentially, all tax exempt hospitals should …

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Why is Fraud so Prevalent

In the past year I was a speaker at ten different Healthcare Financial Management Associations (HFMA) conferences.  In my speech I describe how the financial fraud at HealthSouth began in the area of revenue recognition.  At the conferences I am amazed by the number of HFMA members who approach me and tell me they have been exposed to similar accounting indiscretions at their institutions.  The number of publicly held healthcare companies that have misstated their revenues and accounts receivables is well documented.

Why is this type of fraud so prevalent?  Fraud prevention experts tell us that the propensity for fraud occurs when three critical elements come together:  motive, opportunity, and rationalization.  The motive here of course is the desire to improve the financial appearance of the entity.  The opportunity occurs because the revenue recognition process in healthcare is very complex and requires a tremendous amount of estimating on the part of the accountants.  …

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Opting Out of Reform: How is it done?

The purpose of this post is not to argue for or against opting out of The Patient Protection and Affordable Care Act. Although, that is probably the discussion it will invoke. Instead, the purpose of this post is to help the reader understand what exactly the State Waiver is and what is required in order for it to be granted.

Section 1332 of The Patient Protection and Affordable Care Act allows for Waiver of State Innovation. This Waiver allows for the Secretary of Health and Human Services and the Secretary of the Treasury, to waive certain requirements falling under the jurisdiction of the State for plan years beginning on January 1, 2017. The waiveable requirements include but are not limited to: establishment of qualified health plans, consumer choices and insurance competition through health benefit exchanges, reduced cost sharing for individuals enrolling in qualified health plans, refundable credits for coverage under a qualified health plan, shared responsibility for …

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