insurance companies

Following peers, Kaiser profits plunge

Wed, 07 May 2008 06:59:58 -0400

As FierceHealthFinance readers probably know, the last few weeks have been ugly for health plans, many of which announced disappointing first-quarter results. True, it's worth bearing in mind that most are still profitable, but on the other hand, their margins seem to be in freefall--something neither shareholders nor Wall Street take lightly. Many of the industry's big names are being hit by this trend, including UnitedHealth Group, Humana, Cigna, WellPoint and Health Net.

This week, Kaiser Foundation Hospitals and Health Plan joined the list of unfortunates, announcing that it saw a 64 percent drop in net income during the first quarter of this year compared to the same quarter last year. Profits plunged $698 million during the first quarter of last year to $250 million for the first quarter of this one. The descent includes a loss of $295 million in non-operating income for the first quarter of 2008 versus a $177 million profit during the first quarter of 2007, which it attributes to weakness in its investment portfolio.

Meanwhile, Kaiser increased net income from $521 million during the first quarter of last year to $545 million this year, a boost that includes the addition of 25,000 members. Operating income climbed from $9.4 billion during the first quarter of last year to $10.1 billion for the first quarter of this year. Furthermore, Kaiser said it provided more than $1 billion in community benefit during 2007.

To learn more about Kaiser's results:
- read this East Bay Business Times article
- read this Kaiser press release

PLUS: Kaiser has announced that it's completed the rollout out of its immensely expensive outpatient electronic medical system, which cost the organization a cool $4 billion, executives said. Article

Related Articles:
UnitedHealth suffers financial setback
WellPoint profits fall 25 percent during first quarter
Cigna first-quarter profits drop 80 percent

Providers could face big squeeze in '09

Wed, 30 Apr 2008 06:59:59 -0400

Next year isn't likely to be pretty for providers. As a story in this week's newsletter notes, insurance companies have been watching profits fall, so they're likely to raise premiums in 2009. Then, the dominoes begin to fall: In an effort to save, employers will raise deductibles and co-pays, employees will carry bigger financial burdens and voilà--bad debt will rise. Worse, with health plans struggling to regain their profit levels, providers are likely to face tougher pressure to maintain, or even cut their rates. Then, of course, there's the crisis currently roiling the financial markets, which limits providers' ability to get loans, issue bonds and finance deals.

Add in the likelihood that health system reforms could be in play next year--when the U.S. swears in a new president--and you're looking at a scary 2009. If things don't play out just right, providers could face a serious squeeze, with patients who can't pay on one side and insurers who won't on the other.

Hospitals are particularly vulnerable here. With far too many operating on razor-thin margins (or losing money), next year could turn out to be a bloodbath, with the U.S. seeing an explosion of hospital bankruptcies and closures. Small wonder many are battening down and beginning to demand up-front cash payments for services where they can, though that, too has its down side. (This practice may slash bad debt, but it's not exactly warm and fuzzy, and besides, in a tough competitive market consumers may just go elsewhere.)

All that being said, providers aren't powerless. This is the year to begin partnering aggressively--one reason why physician-hospital JVs seem to be coming back into vogue--and to consider mergers and acquisitions that beef up your bargaining muscle quickly. After all, if I were a health plan negotiator, I'd try a "divide-and-conquer" strategy to get the best deals.

Now, it's your turn, readers. What strategies do you think providers (especially hospitals) need to pursue to survive the next year or two? Do you think their salvation lies in better managed care contracting? Building volume? Partnering? Attracting venture capital? Investing in new vehicles (say, medical real estate or biomedical start-ups)? I'd love to hear your thoughts. - Anne

'Facilities fees' for doctor visits startle patients

Wed, 19 Mar 2008 07:59:55 -0400

Healthcare billing is complex enough without throwing another factor into the mix. Increasingly, however, it seems that consumers are being caught off guard by a new bill--a "facility fee" for visiting doctors based in a hospital-owned building--which these days, they're usually expected to pay on their own. The issue isn't new, but it's hotter now that many patients struggle with high deductibles imposed by consumer-directed health plans.

As readers of FierceHealthFinance probably know already, patients who come into a hospital are billed not only for professional service, but also a facilities fee for use of the building. However, increasingly, hospitals are also imposing such fees for doctor visits in their buildings, something that insurance often refuses to cover. The fees vary enormously, from a relatively trivial $20 or $30 to a few hundred dollars.

While doctors' offices that charge such fees, such as Milwaukee's Froedtert & Community Health, usually post signs warning patients that a facility fee will be assessed, consumers aren't sure what the signs mean, and often end up arguing with insurance companies over the unexpected bill. Making the sting worse, some insurance companies treat the facilities fee at the doctor's office as the first dollar of what can be a high hospital deductible, rather than applying it to a physician deductible.

One Wisconsin legislator, Rep. Charles Benedict (D), has introduced a bill that would require physician offices to disclose facility fees in advance. The bill passed the state Assembly this month, and now Benedict hopes to find a co-sponsor in the state Senate. And at least two facilities--Seattle's University of Washington Medical Center and Virginia Mason Medical Center--settled suits in 2006 contending that patients should have been warned about much-higher charges by affiliated clinics.

To learn more about this issue:
- read this Milwaukee Journal Sentinel piece

Related Article:
Clinic "facility fees" spark legal battles. Report