Archive for the ‘Management’ Category

Is Consolidation a Good Thing for Healthcare?

Two weeks ago, I noted the heightened M&A activity across the nation and here in Georgia for hospitals.  Other bloggers on HealthFlock like Mark Reiboldt have also noted the expected wave of consolidation in a recent post.  With so much talk about the topic, I think it worthwhile to pause and ask ourselves what value consolidation brings to our industry.   From my vantage point, I have heard some argue that this is desperately needed for entity survival; others loudly state that it’s a fade and will inevitably lead to poor returns and future divestitures, as seen by failed mergers in other industries. 

To give an opinion, I’ll first note a few reasons why we’re seeing increased M&A activity in the industry.  According to in-depth analysis, The Advisory Board Company has claimed that five forces are responsible for this trend (to which I would generally agree):

  • Favorable Market Environment (e.g. low interest rates ease access to capital)
  • Increased Revenue Pressures (as a …

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The Value of Good Auditors

As I discussed in my first blog, revenue recognition is a fertile area for healthcare financial fraud.  What measures can be taken to prevent this problem.

The potential of being caught most often persuades likely perpetrators not  to commit the fraud.  Stated another way: if you think there is a good chance of being caught you will not commit fraud.  The potential of being caught and the existence of a thorough control system are critical to any effective fraud prevention program.  It is best to be proactive rather than reactive. At Healthsouth the first time we fraudulently adjusted our revenues we  discussed the chance of being caught. All involved agreed we did not think what we were doing would attract the auditor’s attention.

The audit committee of the board must be staffed with people with some understanding of healthcare revenue recognition.  These board members must spend more time at the  company than just board and committee meetings.  The directors must have …

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Clinical Integration and the Healthcare System of the Future

When one speaks on topics like healthcare reform and the future model of healthcare delivery in the United States, we will often hear about innovative technologies that are going to revolutionize the healthcare system and solve all of its inequities.  Technologies that tell your elderly family members when to take their medication; or, tools that allow people to track their medical history via the Internet – these types of things are often presented as the future of the US healthcare system.  The multitude of innovative solutions flooding into the industry on a daily basis promise to enhance the quality of healthcare services and decrease costs associated with these services for patients.

Technological innovation will be a critical component of any US healthcare model that is adopted in the future.  Our medical services are too vital not to embrace advanced tools, resources and technologies that can absolutely make the system better.  But aside from technology’s role in the …

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Taxpayers Deserve to Know What They are Paying For

When taxpayers are footing the bill, the cost of goods or services should be transparent.  From coffee shops to beauty shops and wherever seniors gather throughout America, the talk these days is about modern science and how those who have been in pain for years can now have routine knee or hip replacements.

Other medical devices such as pacemakers and stents are extending the lives of and improving the quality of life for older Americans. As the first of 78 million baby boomers begin to retire this year, they will enroll in Medicare and many will have these procedures.

The problem is the federal government is paying top dollar for anything from a titanium shoulder to a spinal implant. Medical device manufacturers require hospitals to sign confidentiality agreements that make it impossible for hospitals to disclose or document the cost of devices in order to inject true price competition into the $153 billion medical device marketplace. Some physicians earn consulting fees for …

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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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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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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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