Hospital Mergers Are Hot

August 15, 2013

From The New York Times:

Hospital Mergers

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On West Penn Allegheny Revenues, Loses

July 11, 2011

Two bits of financial information about West Penn Allegheny Health System, which is being acquired by Highmark. 

1. WPAHS lost $146 million in the fiscal three years ended June 30, 2010 and an additional $20 million in the fiscal nine months ended March 31, 2011.

2. WPAHS gets about 24% of its revenues from Highmark.


Inside the Highmark, West Penn Merger Talks

June 30, 2011

Gary Rotstein of the Pittsburgh Post-Gazette speculates on the tenor of merger talks between Highmark and West Penn Allegheny Health System.

WPAHS: Thanks for coming to talk this over.

HIGHMARK: Glad to do it, but you kept me in the waiting room for 40 minutes. And the magazines were old and crummy….

WPAHS:I don’t see what you’re getting so huffy about. I had one heckuva time trying to get through on the phone to set this meeting up….Your phone tree had all these options and numbers and circular routes back to the menu and I never had a chance to reach a live human being for what I actually needed….That reminds me — I’ve got some forms here for you to fill out, before we actually proceed. Put your signature several times on each page, especially on the lines where it seems redundant, and then initial everything.

HIGHMARK: No problem. We’re happy to give you the cash you need to keep all of the hospitals open, so long as you meet our qualifying criteria.


Sure Sign Utilization of Medical Services is About to Increase

February 2, 2011

Hospital executives in a survey by Cowen & Co. say they don’t expect any near-term recovery in utilization of medical services for commercial health plan members, and nearly a third of those surveyed believe that this lower-than-average trend may be the “new normal.”  To me that’s a sure sign that utilization is about to increase.  Executives admit, however, that utilization picked up a bit in the fourth quarter of 2010.  The survey notes:

Fewer surveyed hospital executives indicated large reductions in inpatient and outpatient volume in 4Q/10 relative to earlier in the year. Those hospitals witnessing down inpatient volume generally indicated declines in the 1-6% range versus 6%-plus. However, hospitals experiencing outpatient volume strength generally saw rises in the 1-3% range, with fewer indicating a rise of 4%-plus versus 3Q/10. Commercial volume trends in 4Q/10 seemed to consolidate towards an average of flat on both inpatient and outpatient metrics, with fewer extremes (either up or down). 

The Cowen survey mirrors those of other Wall Street firms.  An analysis by Credit Suisse finds that while hospital utilization volumes remained soft as late as the third-quarter of 2010, “volume trends improved as we moved through the quarter.”  Deutsche Bank also finds that declines in MCO inpatient utilization trends appear to be moderating.  In July, Deutsche Bank noted that MCO discharges were down 5.7%, compared to a 2.9% decline in September. 

Is this the “new normal” or just the end of a downcycle?  My guess is it’s the latter.


Lessons of California ACOs

October 27, 2010

The Integrated Healthcare Assn. has released a report on the lessons of accountable care organizations in California, which contains some interesting tidbits for health plans.  (hat tip: Charles Boorady, Credit-Suisse).  Among the lessons cited in the report:

  • “ACOs are not a panacea for health care spending control: Some of California’s provider organizations have been able to use their market clout to extract high payments from health plans, as the plans’ ability to exclude providers from their networks is limited by consumer demand and regulatory network adequacy requirements. Higher-cost and inefficient providers have not faced enrollment penalties because the current California market does not incentivize purchasers or consumers to choose lower-cost or more cost-efficient providers. As ACOs are rolled out across the country, health insurance benefit designs should reward patients for choosing higher-value ACOs.”
  • “ACOs must be agnostic to insurance type: Most provider organizations in California have focused on commercial, Medicare, and Medicaid HMO plans…but for ACOs to be viable across the country, mechanisms must be found to encourage PPO and traditional Medicare and Medicaid patients to use their services.”
  • “Health plans acting in concert on payment methods and performance measurement helped facilitate the growth of California’s provider organizations, and should also play an integral part in fostering ACO development nationally:…In the early days of medical group formation, plans often acted in concert and adopted similar capitation payment parameters, which lessened the administrative burden on groups….Health plans must be ready and willing to foster ACO formation along similar lines, as a critical mass of payers will be pivotal to their success.”

Quote of the Day: David Bertke

September 8, 2010

David Bertke, vice president of managed care at hospital system TriHealth Inc. (Cincinnati), in response to my LinkedIn question: Are medical homes/ACOs the future or just another fad?:

We have over 100 employed PCP’s and they are concerned about the future because of their relatively low pay. That could be attributed to the under value attributed to CMS weights. In a meeting recently, a medical director with Humana called medical home the last hope for PCP’s. So at least in the opinion of one person, the answer is that it better not be a fad.


Healthcare Reform to Impact Hospitals Long-Term

May 24, 2010

Liz Sweeney of Standard & Poor’s discusses how healthcare reform will impact hospital finances in this video interview with our own Zarina Ahmed.  From the S&P offices in New York, May 20, 2010.


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