FierceHealthFinance, news for the healthcare IT industry

February 13, 2008
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Also Noted: Spotlight On... Key features for revenue cycle management IT; OIG says "yes" to prompt-pay discounts; NY hospitals spend millions to renovate EDs; and much more...

Hello all! I'd like to welcome you to your first edition of FierceHealthFinance, the new weekly newsletter for healthcare CFOs and financial managers.

As you'll see, FHF is tightly focused on the problems that keep healthcare financial leaders up at night, including payer reimbursement issues, financing, governance, regulatory/legal compliance, IT investment, collections and more. We're not going to bore you with long, painful takes on these issues, though; just straight-to-the-point summaries that give you just what you need to know.

Over time, we hope to become one of your most trusted resources for staying on top of critical healthcare finance news and issues. As you'll see, we take a comprehensive look at the industry, and work hard to arm you with the breadth of knowledge you need in today's amazingly complex healthcare environment.

Along the way, here in this space, you'll get a dose of my opinion on things--with which I encourage you to disagree, or add in facts where I might have left gaps. If you have something to say, we'd love for you to write and tell us what you think. There's space here for your thoughts too!

And now, with no further ado, here's your issue. Again, welcome, and we look forward to serving you. - Anne

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1. Effort could force Sarbox on MA non-profit hospital
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As FierceHealthFinance readers doubtless know, the Sarbanes-Oxley Act imposes strict financial disclosure rules on public companies--but not non-profits. In Massachusetts, however, a healthcare workers' union is arguing that under Massachusetts law, board members of non-profit Beth Israel Deaconess Medical Center should be required to follow Sarbox disclosure rules with its audits. The request springs out of a long-standing battle between the 1199 SEIU United Healthcare Workers East, which has been organizing at the Harvard-affiliated facility.

The SEIU is arguing that under state law, nonprofit directors who observe Sarbox rules when sitting on public-company boards are required to do the same on Beth Israel's board. That includes six of Beth Israel's members, who sit on the boards of such public firms as Staples, Brooks Automation and Charles River Laboratories. The SEIU's leaders are pushing the issue, they say, because they believe Beth Israel has been commingling bad debt and charity care expenses in its 2005 and 2006 annual reports, a move which would make it look less healthy than it is and give it more leverage against unionization.

To date, it appears that this is largely a war of words. There's little doubt, however, that lawyers and regulators will get involved at some point soon if the SEIU presses its argument. If the SEIU succeeds, meanwhile, heaven knows where it will end. This should be an interesting (and important) battle to watch.

To learn more about this dispute:
- read this CFO article

Related Articles:
Union slams Beth Israel financial practices. Report
Beth Israel, union fight war of words. Report
Union targets Boston teaching hospital. Report

2. Bad debt savages HCA, LifePoint profits
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Two hospital chains checked in with quarterlies over the last week, and they're singing the same song: they've both had their profits socked by bad debt.

HCA, for one, reported that its bad debt expenses for the fourth quarter of 2007 was 13.2 percent of revenue, about 21 percent more than the 10.9 percent level it reported for the fourth quarter of 2006. Meanwhile, bad debt expenses for all of 2007 were 11.7 percent of revenue, up from 10.4 percent in 2006. Taken as a whole, bad-debt was fueled not only by uninsured patients, but also lower collections on patient accounts and annual increases in HCA's gross prices. Meanwhile, profits for 2007 decreased by 15.9 percent, to $874 million from $1.04 billion in 2006, despite a revenue increase of 5.4 percent to $26.86 billion and inflow of $661 million for the sale of three hospitals.

LifePoint Hospitals, meanwhile, saw profits drop 30 percent for fiscal '07, undermined not only by volume losses of 15 percent but also a rise in bad debt to 16 percent. For the year, things looked worse. Despite a revenue increase of 9.7 percent, to $2.63 billion, profits fell 30.2 percent to $102 million in 2007, compared with profits of $146.2 million for fiscal '06.

To find out more about the chains' bad debt crisis:
- read this Modern Healthcare piece and this other piece (reg. req. for both)

Related Articles:
HCA income up, but bad debt still significant. Report
HCA profits fall, smacked down by debt payment. Report
LifePoint shareholder calls for changes. Report
HCA sees bad debt rising until patients get insured. Report

3. NJ hospitals going under as state bailout cash ends
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A couple of weeks ago, a New Jersey commission made the decision to stop providing bailout funds--typically, advances from the state's charity care pool--to struggling hospitals that they felt weren't providing essential services. This was scary news for administrators, given that according to the commission's analysis, 38 of the state's 78 acute care hospitals scored below the state average on key financial metrics like profitability and liquidity. How bad is the situation now? Consider Barnert Hospital, which was $45 million in debt and had $200,000 in the bank. Not too surprisingly, it had to file for bankruptcy and close this month. And it's probably not the last to face this prospect.

The state's hospitals, for their part, say they might not need bailouts in the first place if the state's charity care reimbursement program paid better. According to the commission's own report, charity care payments cover only 70 cents on the dollar on average, and sometimes fall as low as 22 cents on a dollar. Given that about 1.3 million of the state's 8 million residents are uninsured, that can hit a hospital pretty hard.

To learn more about the financial issues facing New Jersey hospitals:
- read this piece from The New York Times (reg. req.)
- read the Commission on Rationalizing Health Care Resources report (.pdf)

Related Articles:
NJ begins sorting hospitals. Report
NY gets $1.5 billion to close ailing hospitals. Report
New York health system sues to prevent hospital closure. Report

4. Study: Eligibility verification boosts paid accounts
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A new study suggests that providers who routinely verify patient insurance eligibility and benefits see higher rates of paid accounts--and that invalid patient matches scuttle many attempts at electronic validation. The study, sponsored by the California HealthCare Foundation and conducted by health plan and trade group alliance CAQH, found that missing and invalid insurance member ID numbers tend to significantly limit the extent to which providers verify insurance eligibility. That's the case despite the fact that the provider could almost always use a patient name to help identify the patient, researchers noted.

It also notes that if providers do richer searchers, such as using member names and dates of birth, they could improve the validation rate of HIPAA 270/271 transactions even if patient ID numbers are missing. They cite one case, for example, of a health plan that made 500,000 matches in a month without member IDs, making life much easier for both the plan and providers.

To learn more about the study:
- read this CAQH release (.pdf)

5. Case study: NY hospital drops pharma CME funding
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Think you can't afford to drop pharmaceutical company funding for continuing medical education? Perhaps executives at Memorial Sloan-Kettering Cancer Center had the same fears, but if so, they got over it. Sloan-Kettering, which once relied on the pharmas for about one-quarter of its educational funding, made a decision early last year to stop accepting such support.

To cover the loss, it made cuts large and small, including holding more meetings on campus (as opposed to renting space), relying on its own speakers (rather than paying airfare and hotel costs for outsiders), and raising registration fees 10 percent to 20 percent for CME attendees from outside the institution. Sloan-Kettering also slashed marketing costs for CME, cutting back on direct mail and journal ads substantially.

Sure, not everyone has the prestige, inside funding, and 350-seat auditorium the cancer hospital has, but hey, it's still food for thought. With pressure rising to push out pharma influence, every industry dollar is at risk, so it's good to be reminded that it's possible to do without.

To learn more about Sloan-Kettering's strategies:
- read this blog item from The Wall Street Journal

Related Articles:
Senate investigates pharma influence on CME. Report
Psychiatrists getting the largest pharma gifts. Report
Doctors weigh in on pros and cons of accepting drug/device freebies. Letters
Congress debates pharma gift disclosure. Report

ALSO NOTED

TODAY'S SPOTLIGHT... Key features for revenue cycle management IT
On the fence as to whether it's time to invest in revenue cycle management tools, upgrade your current systems or just wait things out until it's clearer what you need? You're not alone, says David Hammer of McKesson Provider Technologies. However, despite the confusion in the marketplace, there's a few features--like build-in "bolt-on" capability and powerful analytics--which just about everyone wants, he writes. Article

> The HHS Office of the Inspector General has said that yes, it's OK to give patients who pay promptly for inpatient stays a significant discount. FierceHealthcare

> New York City hospitals are spending millions to renovate their emergency departments in an effort to streamline operations and reduce crowding. Article

> Georgia doctors say that the state's plan to increase fees paid under Medicaid is good, but argue that the planned increases aren't nearly large enough. Article

> Vermont is considering raising provider taxes on hospitals, a move which could cut net reimbursements $6 million to $16 million per year. Article

And Finally... Is the current CT scan craze coming from a desire to heal, or greed? Editorial

Editor: Anne Zieger - anne@fiercemarkets.com
VP Sales & Business Development: Jason Nelson - jason@fiercemarkets.com
Publisher: Maurice Bakley

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