Many private health plans cap prosthesis coverage at $2,500 or $5,000 a year, or pay for just one device per limb in a lifetime. But now amputees and prosthetic-device makers are pushing state legislatures throughout the United States to pass laws that mandate prosthesis coverage. Prosthetic devices are among the biggest-ticket items affected by the effort to curb rising health costs by asking patients to pay a bigger percentage of their medical bills.
Shares of WellPoint plummeted more than 16 percent in after-hours trading March 10 after the company lowered its profit forecast due to higher medical costs and lower-than-expected insurance enrollments. After the WellPoint news broke, shares of other big health insurers fell. Humana was off by more than 10 percent, Aetna declined by about 10 percent and UnitedHealth Group was down nearly 9 percent.
A reprieve for a low-income clinic in Spokane has proved to be short-lived. Operators of the People's Clinic say it will close on May 15. The 1,500 student and low-income patients are being directed to other potential sources of healthcare, and efforts are being made for nurse-practitioners at the clinic to work elsewhere. The clinic has been run by the Washington State University Intercollegiate College of Nursing. It stopped taking new patients at the end of last month.
Horst and Luisa Ferrero took their intelligent, healthy and happy 3-year-old, Sebastian, in for a medical exam last October. Two days later he was dead, killed by a series of medical errors that began with a massive drug overdose. They have formed the Sebastian Ferrero Foundation in the hopes of preventing similar accidents, and hope to help build a $300 million, 125-bed standalone children's hospital in Gainesville within five years.
How does one read the tea leaves to know when a hospital is in trouble? I have six factors for you, courtesy of Moody's Investors Service.
Nonprofit hospitals rarely default on their bond obligations (only 17 Moody's-rated credits have defaulted since 1970), but when they do, the revelation tends to catch people by surprise. Remember AHERF, anyone? In any case, since that implosion last century, hospitals have had to pay a risk premium above what they would have otherwise had to pay for the privilege of borrowing money, say many of the analysts I talk to.
So while the Moody's report was intended to benefit institutional investors, many hospital boards have to be educated about this stuff, too. Kudos to Lisa Goldstein--a friend of HealthLeaders, a heck of an analyst, and author of the report--for putting it out there. Some of it is common sense, but when these kinds of blowups happen, a lot of common sense has long since left the building. So here are the factors that signal trouble:
Excessive emphasis by the board of directors or hospital management on "mission over margin," often manifested in recurring operating losses and high reliance on investment income
Board failure to check management's unfettered capital spending
Weak market share or a failure to establish a clear niche in a competitive market.
Inability to recruit physicians and attract volumes to replacement hospitals or new hospitals
Failure to plan for, and react to, weak local area economic conditions
Inflexible responses to cuts in Medicare and Medicaid
Most of this stuff is just ordinary blocking and tackling, but when major financial blowups happen, hindsight often shows that multiple blocks were missed and multiple tackles were broken. The report comes out as many observers see clouds on the financial horizon in general and for healthcare in particular. Of the 17 rated defaults that have happened in the past 37 years, 10 occurred before 2000 and seven have happened since then, indicating a modest increase in defaults recently. Growing challenges to the industry, according to the report, include rising capital investment and potential Medicare reimbursement cuts.
Often, rating agencies provide good early warning of investments going bad. But those warnings trickle out in the form of downgrades and outlook revisions. That's why rating agencies are there, after all--but ask those who got burned on collateralized debt obligations in the financial markets last summer whether the rating agencies provided enough warning?
To really get the full story about how bad or good the situation is, a little more digging is required. If you're paying attention as a board member or officer, you're likely to take steps to ameliorate any of the factors mentioned before they morph into a verifiable crisis. But the fact remains that in the coming years, some hospitals will default, lots of money will be lost, and someone who's supposed to be watching will have been asleep at the switch.
An expansion of state-subsidized health insurance for uninsured adults is expected to be debated soon in the Pennsylvania House. Rep. Todd Eachus, chairman of the House Democratic Policy Committee, said that he was putting the finishing touches on legislation to provide low-cost insurance to roughly 800,000 uninsured adults and small businesses that cannot afford to cover employees. The move comes more than a year after Gov. Ed Rendell introduced a plan intended to accomplish that goal.