For healthcare providers interested in federal contracts, there are several key advantages related to small business contracting that should be of particular interest to most physician groups.
One of the major objectives of federal procurement policy is to provide small businesses with fair and reasonable opportunities to participate in federal contracts. This objective covers all types of federal contracts and extends to healthcare organizations. There are a number of incentives built into procurement laws and regulations that actually favor small businesses under certain conditions.
A key point is that there is no single definition of a small business that applies equally to all contracts. In fact, the definition of a small business is established for each solicitation. In general, every Request for Proposal or Request for Quote will specify a North American Industry Classification System (NAICS) code that reflects a certain industry, and a corresponding size threshold for that industry determined generally by annual sales revenues or number of employees.
Industry classifications and size thresholds are prepared by the Census Department and updated periodically. For example, according to the most recent NAICS data, physician groups are classified under NAICS code 621111. A physician or group practice qualifies as a small business if their average annual revenues for the last three years are less than $10 million. Similarly, most acute care general hospitals are classified as NAICS code 621118, and are considered small business if their average annual revenues are less than $35.5 million.
There are two primary ways that small businesses can participate in federal contracts:
Set-asides
In addition to the general category of small businesses, there are a number of subcategories that are afforded a statutory contracting preference under federal law. This preference enables the government to set aside a certain percentage of contract awards to organizations that meet these criteria. The major categories of organization include:
Women Owned Business
Small Disadvantaged Business
Historically Underutilized Business Zone (HUBZone) Business
Veteran Owned Small Business
Service-Disabled Veteran-Owned Small Business
8(a) Business (socioeconomically disadvantaged)
Native American
Alaskan Native Corporation
When contracts are set aside for a particular category, the competition pool is restricted to organizations that meet this criterion.
Another key provision of federal contract law is that government contracts are required to be set aside for small business when the contracting officer has a reasonable expectation that he/she will receive offers from at least two qualified small businesses at fair market prices. This is a powerful incentive, as it effectively means, at least in principle that many federal procurements can be set aside for small business. Even if something is not set aside initially, organizations have the opportunity to make a case to contracting personnel and get something set aside that was not originally planned as such.
Subcontracting
The second major way that small businesses can participate in federal contracts is through a subcontract. As a means of encouraging large businesses to use small business, all federal agencies establish subcontracting goals for all contracts that are in excess of a certain threshold. At present, this amount is $550,000. What this means is that each company with a contract expected to have a value in excess of $550,000 is expected to submit a plan to subcontract a portion of the total contract dollars among the different categories of small business identified above.
Armed with a little bit of knowledge about some of the "ins and outs" of small business contracting under federal law, a hospital or physician group will be surprised at the number of potential business opportunities that they may actually be able to create for themselves.
Scott Honiberg is president and Jeff Weinstein is of counsel at Potomac Health Associates, Inc. They can be reached at S.Honiberg@PHAInc.com or J.Weinstein@PHAInc.com.For information on how you can contribute to HealthLeaders Media online, please read our Editorial Guidelines.
Uncompensated care costs are up. Drastically in some cases. I know this because it's what I hear in conversations I have with most hospital leaders these days. I also see it in American Hospital Association data, with one recent report showing that uncompensated care as a percent of gross net revenues has "significantly increased" for 27% of nearly 1,100 community hospitals. Another 43% saw moderate increases.
Yet, a recent Moody's Investors Service report, flies in the face of this and is showing that, at least for investor-owned hospitals, uninsured and uncompensated care numbers have been relatively flat during the past year.
"What prompted us to do the report is there was a disconnect between what we have seen vs. what everybody's expectation has been," says Dean Diaz, vice president and senior credit officer at Moody's. Most of the data comes from company filings.
Moody's analysts reviewed data from several for-profit hospital companies, including Community Health Systems, IASIS Healthcare, Health Management Associates, HCA, Tenet Healthcare, Vanguard Health Systems, LifePoint Hospitals, and Universal Health Services, finding that while bad debt has increased, numbers have not spiked as expected. For example, data from four of the for-profit hospital operators shows that the combination of bad debt, charity care and self-pay discounts as a percentage of net revenue plus charity care and self-pay discounts increased no more than 2% year over year as of March 2009.
The report also finds that growth in uninsured volumes is below historical growth rates. Between March 2008 and March 2009 six of the for-profit operators fluctuated month to month between -15% and roughly 15% growth in self-pay admissions, with most hovering at 0.0% or below during that time period. "Overall, the data do not yet seem to support expectations of a surge of uninsured individuals being treated at hospitals operated by the rated investor-owned hospital companies," say the report's authors.
There are a couple of theories behind the flat numbers. The spike in uncompensated care may be somewhat delayed due to stimulus funding, which extended COBRA benefits to Americans who lost their jobs. Also, hospitals are doing a better job at front-end collections and patients may be deferring care.
"It's hard to tell," says Diaz. "I think it shows that people have been out in front of the issue." It also may be an indication that there is even more of a lag than was expected between the end of 2008, when the economy started to go south, through the first quarter of 2009, he adds.
Because accounting methods for uncompensated care can vary between for-profit hospital operators, it is difficult to determine total uncompensated care across the sector and to compare from hospital to hospital. There is no single reliable metric that pinpoints total uncompensated care across the for-profit hospital industry that is publicly available, says Diaz.
"One metric that people usually point to is bad debt as a percentage of revenue, and I don't think that tells the story because there are different treatments of what you deem to be charity care," says Diaz. Additionally, he notes, hospitals may differ in how deep a self-pay discount they offer. "So it doesn't make for a very comparable metric." A better metric to look at is the combination of bad debt expense, and the amount of charity care, and discounted care provided in the reporting period, says Diaz.
While the overall news comes as somewhat of a relief, hospitals probably aren't in the clear. Diaz believes that for-profit hospitals could still experience a surge in uncompensated care. "Hospitals need to retain that focus they have applied because there is still a possibility that we will start to see some of those trends come through."
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St. Joseph's Hospital and Medical Center President Linda Hunt is being
promoted to service area president for Catholic Healthcare
West Arizona, which includes Chandler Regional Medical Center, Mercy
Gilbert Medical Center, and St. Joseph's Hospital and Medical Center.
Medical Center of Plano (TX) has tapped Patrick Whitmore as its CFO. Whitmore most recently served as chief financial officer for Vanguard Health Systems in Chicago for two acute-care teaching hospitals affiliated with The University of Chicago. Before that, he served as CFO at hospitals in Nashville, TN, Aurora, CO, and Salt Lake City, UT.
Enloe Medical Center's trustees named Mike Wiltermood as Enloe's new president/CEO, effective July 1. Wiltermood has served as the medical center's interim CEO since March, when he replaced Deborah Yancer. Wiltermood was the COO at Enloe Medical Center, overseeing the day-to-day operations of the medical center, from July 2007 until March 2009. Before coming to Enloe, he was the executive vice president/COO of Fremont-Rideout Health Group in Yuba City, CA.
Mike Schmidt, president of Ministry Health Care's Saint Joseph's Hospital in Marshfield, WI, announced that he plans to retire in January 2010. Schmidt began his 25-year career at Saint Joseph's in 1984 as vice president of finance and CFO.
Physician Wellness Services, a company that helps physicians and healthcare organizations manage the stress and other mental and behavioral issues that can lead to disruptive behavior and performance issues, has named Alan Rosenstein, MD, as medical director.
WellCare Health Plans, Inc. President and CEO Heath G. Schiesser has told the company's board of directors that he will resign when they appoint his replacement. The board has formed a search committee. Because Schiesser intends to serve until his replacement has been named, the board reaffirmed his nomination to stand for reelection as a director at the company's 2009 annual meeting of stockholders scheduled to be held on July 30.
Edward G. Chadwick has been selected as executive vice president for finance and CFO of Wake Forest University Baptist Medical Center, a new position created as part of the Medical Center reorganization that began two years ago. Chadwick began work July 1. Chadwick will report directly to John D. McConnell, MD, CEO of the Medical Center. The chief financial officers of the Medical Center's two main component institutions, North Carolina Baptist Hospital and Wake Forest University Health Sciences, will report directly to Chadwick while also remaining part of the respective executive teams for the Hospital and Health Sciences. Most recently Chadwick was CFO and senior vice president for Trinity Health, based in Novi, MI, the fourth-largest Catholic healthcare system in the nation.
