Carrying excess weight carries a sizeable financial cost.
The overall, tangible, annual costs of being obese are $4,879 for an obese woman and $2,646 for an obese man, while the annual costs of being overweight are $524 and $432 for women and men, respectively, according to a study released this week by the George Washington University School of Public Health and Health Services.
Adding the value of lost life to these annual costs takes an even higher financial toll. Average annualized costs, including value of lost life, are $8,365 for obese women and $6,518 for obese men. For both genders, the incremental costs of obesity are much higher than the incremental costs of being overweight, the study found.
More than 60% of Americans are overweight or obese. If the current trajectory continues, 50% of the population will be obese by 2030, the study shows.
While the study focuses on the cost to the individual obese and overweight person, such as the value of lost life, lost wages, gasoline costs, and life insurance, it also notes that some of the costs are borne by employers and the government, including direct medical costs, short-term disability, disability pension insurance, absenteeism, and productivity losses.
Employers directly pick up the costs for many of these expenditures. However, employees indirectly share part of this burden through lower wages.
In addition, through Medicare and Medicaid, the government pays a significant portion of direct medical costs for their beneficiaries, the study shows.
The study's authors said their findings create only a partial look at the individual costs related to obesity, because existing research on the topic doesn't take into consideration consumer-related costs such as clothing, air travel, automobile size, or furniture.
Not surprisingly, the study found that incremental costs are much higher based on the degrees of obesity. Total incremental costs for obese women are more than nine times higher than those for overweight women. For obese men, the incremental costs are six times higher than for overweight men.
For the larger society, direct medical costs due to overweight and obesity are sizeable. For example, with estimates that incremental obesity-related direct medical costs total $152 billion annually. The study cites other studies that suggest that direct costs attributable to obesity could double from 2010 to 2020 and account for 15.8% - 17.6% of national health care expenditures in 2030.
The Centers for Disease Control and Prevention has awarded $42.5 million for 94 public health services delivery improvement projects at state, tribal, local, and territorial health departments.
"These funds are a down payment on improving public health services across the nation," says Judith A. Monroe, MD, CDC's deputy director for state, tribal, local and territorial support. "With these funds, we will help our nation's public health departments work more effectively and efficiently to detect and respond to public health problems. This program will strengthen the nation's public health system and our ability to improve the health and well being of all Americans."
The funding awards—ranging from $100,000 to $2 million—come through the Prevention and Public Health Fund created by the Affordable Care Act and will be distributed to 49 states, eight federally recognized tribes, Washington, DC, nine large local health departments, five territories, and three Affiliated Pacific Island jurisdictions.
This five-year cooperative agreement program entitled, Strengthening Public Health Infrastructure for Improved Health Outcomes, will provide health departments with money to improve the delivery of public health services including:
Building capacity within health departments for evaluating the effectiveness of their organizations, practices, partnerships, programs and use of resources through performance management
Expansion and training of public health staff and community leaders to conduct policy activities in key areas and to facilitate improvements in system efficiency
Maximizing the public health system to improve networking, coordination, and cross-jurisdictional cooperation for the delivery of public health services to address resource sharing and improve health indicators
Disseminating, implementing and evaluating public health's best and most promising practices
Building a national network of performance improvement managers that share best practices for improving the public health system.
CDC received more than 140 applications from health departments seeking funds through this cooperative agreement.
Public Health Systems and Infrastructure awardees and funding levels are:
$200,000 to Alabama State Department of Public Health
$100,000 to Alaska Native Tribal Health Consortium
$100,000 to Alaska State Department of Health and Social Services
$100,000 to American Samoa Government Department of Health
$289,586 to Arizona State Department of Health Services
$200,000 to Arkansas State Department of Health
$2,060,128 to California State Department of Public Health
$1,760,128 to Cherokee Nation
$200,000 to City of Chicago
$300,000 to Colorado State Department of Public Health and Environment
$100,000 to Commonwealth of Northern Mariana Islands Department of Public Health
$200,000 to Connecticut State Department of Public Health
$100,000 to Dallas County Health and Human Services (TX)
$100,000 to Delaware State Department of Health and Social Services
$100,000 to District of Columbia Department of Health
$100,000 to Federated States of Micronesia
$2,060,128 to Florida State Department of Health
$399,836 to Georgia State Department of Community Health
$100,000 to Gila River Indian Community
$100,000 to Guam Department of Public Health and Social Services
$1,100,000 to Hawaii State Department of Health
$200,000 to Houston Department of Health & Human Services
$200,000 to Idaho State Department of Health & Welfare
$400,000 to Illinois State Department of Public Health
$300,000 to Indiana State Department of Health
$200,000 to Iowa State Department of Public Health
$200,000 to Kansas State Department of Health and Environment
$200,000 to Kentucky State Cabinet for Health and Family Services
$1,859,950 to Los Angeles County Department of Public Health
$200,000 to Louisiana State Department of Health and Hospitals
$1,758,786 to Maine State Department of Health and Human Services
$199,434 to Maricopa County (AZ)
$300,000 to Maryland State Department of Health and Mental Hygiene
$1,960,128 to Massachusetts State Department of Public Health
$400,000 to Michigan State Department of Community Health
$99,866 to Mille Lacs Band of Ojibwe Indians
$1,960,128 to Minnesota State Department of Health
$199,585 to Mississippi State Department of Health
$300,000 to Missouri State Department of Health and Senior Services
$100,000 to Montana State Department of Health and Human Services
$100,000 to Montana-Wyoming Tribal Leaders Council
$100,000 to Navajo Nation Division of Health
$1,200,000 to Nebraska State Department of Health and Human Services
$200,000 to Nevada State Department of Health and Human Services
$100,000 to New Hampshire State Department of Health and Human Services
$1,638,751 to New Jersey State Department of Health and Senior Services
$199,877 to New Mexico State Department of Health
$2,060,128 to New York City Department of Health and Mental Hygiene
$400,000 to New York State Department of Health
$1,903,858 to North Carolina State Department of Health and Human Services
$100,000 to North Dakota State Department of Health
$100,000 to Northwest Portland Area Indian Health Board
$394,111 to Ohio State Department of Health
$200,000 to Oklahoma State Department of Health
$1,860,128 to Oregon State Department of Health Services
$1,660,128 to Pacific Island Health Officers Association
$400,000 to Pennsylvania State Department of Health
$1,118,493 to Philadelphia Department of Public Health
$200,000 to Puerto Rico Department of Health
$100,000 to Republic of Palau Ministry of Health
$100,000 to Republic of the Marshall Islands Ministry of Health
$99,738 to Rhode Island State Department of Health
$100,000 to San Antonio Metropolitan Health District
$100,000 to San Diego County Department of Health and Human Services
$200,000 to South Carolina State Department of Health and Environmental Control
$100,000 to Southeast Alaska Regional Health Consortium
$1,296,995 to Tennessee State Department of Health
$400,000 to Texas State Department of Health Services
$200,000 to Utah State Department of Health
$1,100,000 to Vermont State Department of Health
$100,000 to Virgin Islands Department of Health
$300,000 to Virginia State Department of Health
$299,981 to Washington State Department of Health
$1,200,000 to West Virginia State Department of Health and Human Resources
$1,960,129 to Wisconsin State Department of Health Services
A federal grand jury in Pittsburgh has indicted a former employee at the University of Pittsburgh Medical Center for allegedly stealing patient data in the first HIPAA-related prosecution in the Western District of Pennsylvania, federal prosecutors say.
Paul C. Pepala, 34, of Monroeville, PA, faces 14 counts related to the alleged disclosure of patients' data for personal gain in February 2008, when he was an employee at UPMC Shadyside Hospital. The indictment lists Pepala as the sole defendant.
The indictment alleges that Pepala disclosed to other people the names, birth dates and Social Security numbers of patients, in violation of HIPAA laws. This patient data was used to file false tax returns in 2008. Pepala was also charged with violating the Social Security Act by disclosing Social Security numbers.
The law provides for a maximum sentence of 80 years in prison, a fine of more than $4.7 million, or both.
By now most readers are familiar with the murder-suicide last Thursday at Johns Hopkins Hospital in Baltimore that also left an attending physician with a serious gunshot wound to the abdomen.
Fortunately, at this writing, the victim, David B. Cohen, MD, a 45-year-old orthopedic surgeon, father of two young children, and all around "good friend and nice guy" to co-workers at the hospital, is expected to make a strong recovery.
If any sliver of good can be plucked from this mindless tragedy, it may be the raising of public awareness about the extent of violence in our nation's hospitals. Even before this latest attack, the issue of hospital violence had begun to be seen on the radar screen for the mainstream media.
The Associated Press, for example, wrote a widely distributed piece on the dangers faced by emergency department workers. Media outlets--including the major cable TV stations--scrambled for follow-up coverage of the Johns Hopkins shooting by putting a spotlight on in the latest violent incidents.
at hospitals.
The issue has gained enough prominence that even network television—that flawed mirror of our society—has taken up the issue. Grey's Anatomy dedicated its season finale this year to a shooting rampage at the hospital.
Of course, HealthLeaders has been covering the issue for months, hoping for the best, but fearing the worst:
All of this newfound media attention is a good thing. Many people view journalists as vultures sweeping into tragedies to pick at the carcass. Regardless of what you think of journalists, media attention creates public awareness, and public awareness can prompt action.
Unless there is evidence of egregious negligence on the part of a hospital, the public is not inclined to blame a hospital if a shooting occurs on its campus, just as they wouldn't blame a car for a drunk driver, or a bank for a robbery. Thinking people understand that hospitals are as vulnerable as any other place—if not more so—-to the violence that pervades our society.
Edgardo Tenreiro, COO at Baton Rouge General Medical Center, said the Johns Hopkins shootings immediately prompted memories of a Sept. 3 double shooting at his hospital. "I thought, 'Oh my gosh! We're not the only ones.' In a sense I was somewhat relieved, even though at the same time I was very unhappy that it happened again," he says.
Tenreiro says he doesn't believe BRGMC could have done much to prevent the Sept. 3 shooting. "This was a very, very specific targeted domestic dispute, and we were a target of opportunity. This shooter knew both victims were going to be together in this one location and were targeted in that sense," he says.
He sees a connection with reports of violence in other hospitals. "It's not a hospital trend, but hospitals have been part of a much larger nationwide trend from folks who are using violence to solve disputes," he says. "The public is beginning to realize that this is something that is not just a local issue but a nationwide issue."
Action is being taken on other fronts. The American Society of Safety Engineers on Oct. 19-21 will convene a virtual symposium on workplace violence and other hazards in the healthcare setting. ASSE correctly notes that hospitals present unique challenges for security because of their mission, and virtually unrestricted 24/7 public access. The symposium will address preparing and responding to workplace emergencies, such as on-campus shootings, and also address reducing injuries associated with patient handling, and exposure to infectious diseases.
This pooling of effort and resources is another sign that healthcare leadership is coming around. For too long, it has appeared to me, healthcare leadership has been looking at these violent attacks only as isolated incidents. In one sense, they are right. These attacks are isolated and unpredictable and very hard to prepare for. However, that doesn't mean hospitals can't provide security resources that might thwart, discourage, or mitigate an attack.
Let's hope it doesn't take another shooting to further the issue.
In the meantime, here's wishing Dr. Cohen a speedy recovery.
Thursday's murder-suicide and related gunshot wounding of a physician at Johns Hopkins Hospital in Baltimore provides a horrifying example of violence inside hospital walls.
Unfortunately, it wasn't an isolated incident. Hospital violence is reported almost every day in the media.
Executives at Baton Rouge General Medical Center, for example, are studying the lessons learned from a Sept. 3 domestic violence-related shooting that left one patient and a visitor seriously wounded.
BRGMC COO Edgardo Tenreiro offered a frank assessment of his hospital's response to the shooting, including the flaws.
"The No. 1 thing we learned is we didn't have an appropriate emergency code to notify staff," he says. "The traditional Code White indicates a violent patient. But in cases of an active shooting you don't want to use Code White because staff is going to respond to a Code White. What you want in a situation with a shooter is for staff not to respond, other than security."
BRGMC now refers to shootings as Code Silver, and staff understand that their job is not to backup colleagues, but to ensure that that patients and visitors in their immediate area are safe and locked down. Code Silver also allows employees to provide an explanation for patients and visitors of what could be a stressful situation, with the possibility that they will have to be evacuated, or that heavily armed SWAT police will conduct room-to-room searches.
Second, Tenreiro says make sure your hospital has the ability to establish a mobile emergency command center outside of the hospital, so that you can communicate with employees inside the hospital during a locked down.
"We had to improvise a command center outside on a sidewalk next to the SWAT command," Tenreiro says. "The fact that we didn't have the direct command center communication made it very difficult for us to let folks inside the hospital know the progress that was being made in clearing the hospital."
The mobile command center must have the ability to forward calls to the main command center telephone lines to a designated cell phone, as well as VPN capability to access computer systems remotely.
"The ability to switch the phone and forward to the cell phone, the technology is there and can be easily activated. It just can't be activated the first time you think about it at one in the morning, which is when we thought about it," he says. "You have to have a process in place for that ahead of time so you can activate it automatically."
Tenreiro says it's a good idea to plan potential responses to shootings with police ahead of time, and perhaps run mock drills "You do it on a regulation basis with fire drills, but you never do it for bomb threats or shootings," he says.
It's important that responding police have a familiarity with your hospital. Tenreiro says that many of the police who moonlight at BRGMC as security guards responded to the shooting and guided their SWAT colleagues through the building. "The police need to know the building," he says.
It's also a good idea to have a box of generic ID swipe cards nearby to help police access locked areas of the hospital.
In the aftermath, Tenreiro says BRGMC is providing mental health counselors for staff who may be suffering from post traumatic stress. "One of our staff members who witnessed the whole incident was having some difficulty sleeping. We have a whole mechanism to help and make sure they know that there is help available—that's its normal to ask for it," he says.
There was a lot of talk about installing metal detectors immediately after the shooting, but Tenreiro says he's not sure that is practical. The two hospitals at BRGMC have 88 entrances that provide access to nearly 3 million people each year. "The cost of doing that could be prohibitive. It's not just the metal detectors. It's staffing the metal detectors. Are you going to have them 24/7?" he says. "That is a hospital-by-hospital evaluation. In our case we don't want to convey an image where the hospital is a place that you can't come into."
Tenreiro says he was concerned about the public relations fallout from the shooting, but the hospital issued regular updates to the traditional media, as well as on Twitter, Facebook, and other social media during the shooting and in the immediate aftermath.
The public appears to understand that hospitals aren't to blame for the violence that permeates society, and are just as likely to be crime scenes as any other public area.
"The way we handled it was very appropriate. It was low key but at the same time very reassuring. Folks understood that we had mechanisms in place to deal with this," he says. "It had no effect. In fact, the week after the shooting our census went up. We handled it in a way that allowed the public and the media to react very positively. It had no impact on our business."
The New York City Health and Hospitals Corporation has been awarded two grants totaling $12.8 million for projects that include creating a medical home model for schizophrenics, and renovating facilities to provide more efficient care of diabetics and other chronic care patients.
A $10 million grant for the patient-centered medical home model will coordinate primary care services and behavioral health care for nearly 5,000 patients with schizophrenia within the 11-zip code care coordination zone across Queens, Brooklyn and Lower Manhattan.
HHC will build an IT infrastructure based on the hospitals' existing electronic health records system to allow patient information exchanges among five HHC hospitals and health centers and mental health community-based providers. The information sharing will allow the providers to access clinical information, medication and problem lists, results and referrals. The HHC participating facilities include Elmhurst, Queens and Woodhull Hospitals, Gouverneur Healthcare Services, and Cumberland Diagnostic & Treatment Center.
HHC also received nearly $2.8 million for two construction projects that will reduce excess beds and inpatient services in favor of lower-cost outpatient care. A $900,000 grant awarded to Kings County Hospital Center in Brooklyn will be used to construct a diabetes clinical care suite adjacent to an already existing diabetes resource center. A $1.9 million grant to Woodhull Hospital Center in Brooklyn will help create a Specialty Care Pavilion for chronic disease management, promising an additional 16,000 outpatient visits annually.
The project creates 10 exam rooms for specialty care, new space for clinical support services, a centralized registration area, improved multi-lingual signs providing direction, and a "navigator" to assist patients. Specialty services will include pain management, asthma care, adolescent medicine, dermatology, and surgery. The additional space will allow ultimately for an additional 5,300 specialty visits annually.
Funding for both projects is provided by the New York State Department of Health, and the Dormitory Authority of the State of New York, through the Health Care Efficiency and Affordability Law of New York, and the Federal State Health Reform Partnership.
Annual performance-based incentive plans are growing for physicians in both presence and scale, according to consultants Hay Group's 2010 Physician Compensation Survey.
The survey found that 92% of group-based organizations offer incentive plans to their physicians, up from 75% in 2009.
Physician incentive plans are also being offered by 63% of hospitals this year, as opposed to 51% in 2009. The percentage of integrated health systems offering physician incentive plans remained steady between 2009 and 2010 at 67%. Of the 28 organizations that responded that they had no physician incentive plans, 39% said they were considering them.
"There is safety in numbers, and it has never been truer in healthcare than it is now," says CJ Bolster, national director for Hay Group's healthcare practice. "Integrated health systems have scale and they can offer job security in lieu of having to offer higher incentives. Group practices that are not directly tied to a hospital or system will traverse a bumpier road in the post-reform era, but they will continue to attract physicians with an entrepreneurial drive and an acceptance of risk."
The incentive plans are also increasingly tied to performance measures, with patient satisfaction and quality the leading factors for all surveyed organizations. Fifty percent of group-based practices tie incentives to patient satisfaction and quality; that percentage is slightly lower for hospital-based (43%) and IHS-based (46%) organizations.
"No one should be surprised that healthcare organizations are moving to link pay to performance," says Ron Seifert, executive compensation practice leader for Hay Group's healthcare practice. "Hospitals will increasingly be rated on performance metrics such as patient satisfaction, readmissions and clinical outcomes, and reimbursements are likely to be linked to these as well. Financially, it's in an organization's best interest to embrace these changes now, rather than waiting for all the reform dust to settle. Communally, a hospital focusing on the needs and health of patients is good for everyone."
Incentive bonuses typically supplement base salaries, which are holding flat in hospital-based organizations, with 2.8% increases in 2009-2010, and 2.9% planned increases for 2010-2011. Group-based physician practices offer higher salary increases (4.8% granted in 2009-2010), but the planned base salary increases for 2010-2011 dropped to 3.3%.
Salary structures and salary planning for physicians remain flexible in 2010, respondents show. Half of hospitals and IHS', and 54% of group-based physician practices, say that their process is independent, meaning that they have a philosophy and structure, but that positions, specialties, departments and specific doctors are reviewed individually for their salary potential and subsequent increases.
The 2010 survey participants included integrated health systems, hospitals and group based physician practices, and covers 128 physician specialties, including 40 pediatric specialties, 16 non-physician provider positions, and 13 medical directors.
The Hay Group survey findings are consistent with a study by the Medical Group Management Association and the Society of Hospital Medicine last week which showed that base salary impacts both productivity and overall compensation for hospitalists.
According to the study, State of Hospital Medicine: 2010 Report Based on 2009 Data, hospitalists who receive a lower proportion of total compensation paid as base salary tend to be high producers who are incentivized to earn more.
The report—which contains information on 443 hospital medicine groups and 4,211 hospitalists—found that hospitalists who received 50% or less of their compensation as fixed base salary reported the highest median work relative value units (wRVUs) at 5,407. Hospitalists who received 51% to 70% of their compensation as base salary performed 4,591 wRVUs, compared to 3,859 wRVUs for hospitalists who received 71% to 90% of their compensation as base salary. Hospitalists who received 91% to 100% of their compensation as base salary reported 3,571 wRVUs.
The Department of Health and Human Services will send $31 million to 10 communities in eight states, and the South Carolina Health Department, for programs to reduce obesity and smoking, increase physical activity, and improve nutrition.
The awards funded by the Prevention and Public Health Fund included in the Affordable Care Act are part of HHS' Communities Putting Prevention to Work program, administered by the Centers for Disease Control and Prevention.
"As I’ve seen throughout the year in my work with Let’s Move!, prevention works when it comes to improving the health of our families," First Lady Michelle Obama said in an HHS statement. "These critical investments will help more communities across America tackle serious health challenges like childhood obesity, while promoting physical activity and healthy eating."
This week’s announcement follows the release in February and March of more than $491.8 million in Communities Putting Prevention to Work funds to states, territories and communities. Those projects are supporting statewide and community-based policy and environmental changes in nutrition, physical activity, tobacco control, and tobacco cessation media campaigns.
“To realize our goals of improving the health of Americans and lowering our nation’s healthcare costs, we must address the underlying factors that influence our families’ health—factors like the foods we eat and the conditions that exist in our homes, neighborhoods and workplaces,” said HHS Secretary Kathleen Sebelius.
These Communities Putting Prevention to Work awards will provide communities with the resources to create healthy choices for residents, such as increasing access to healthy foods, improving access to safe places for physical activity, discouraging tobacco use, and encouraging smoke-free environments. Of the 11 new awards, 10 are dedicated to obesity prevention, and one to tobacco cessation.
Seven of 10 deaths each year are caused by chronic diseases such as heart disease, cancer, stroke and diabetes. These same chronic diseases account for more than 75% of our nation’s healthcare spending, HHS says.
HHS also announced $10 million in additional funding for six communities ? all of which were part of the original 44 Communities Putting Prevention to Work communities - to provide mentoring to less-experienced communities based on their previous success in specific policy strategies. Funding for the “Community Mentoring” initiative comes from the stimulus package.
The awards are as follows:
$3 million to Alabama Department of Health: Mobile County, AL, for tobacco prevention
$2.3 million to Arkansas Department of Health: City of North Little Rock, AR, for obesity prevention; and Independence County, AR, for obesity prevention
$5.8 million to Children’s Memorial Hospital/City of Chicago, IL, for obesity prevention
$2.35 million to DeKalb County Board of Health, GA, for obesity prevention
$3.7 million to North Carolina Division of Public Health: Appalachian District Health Department, NC, for obesity prevention; and Pitt County, NC, for obesity prevention
$4.85 million to Pinellas County Health Department, FL, for obesity prevention
$3.6 million to Santa Clara County Public Health Department, CA, for obesity prevention
$3.8 million to Southern Nevada Health District, NV, for obesity prevention
$1.6 million to South Carolina Department of Health and Environmental Control for obesity prevention
The federal Pension Benefit Guaranty Corp. said this week it will assume responsibility for the pension plan covering more than 9,500 workers and retirees at the shuttered St. Vincent Catholic Medical Centers in New York City.
The SVCMC Retirement Plan is 55% funded, with assets of $345 million to cover benefit liabilities of $622 million, PBGC estimates. The agency expects to cover about $267 million of the $277 million shortfall.
PBGC said the intervention was necessary because the underfunded retirement plan will be unable to make benefit payments and will be abandoned after SVCMC's assets are liquidated, its activities cease, and there is no one left to administer the plan. By taking action now, PBGC prevents further deterioration of the plan's condition.
SVCMC, serving the Greenwich Village section on Manhattan's West Side, filed for bankruptcy on April 14, and by the end of May patients had been discharged or transferred to other hospitals, and debtors began selling off SVCMC's assets.
PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ended Sept. 14. Retirees and beneficiaries will continue to receive monthly benefit checks without interruption, and other workers will receive their pensions when they are eligible to retire. Until the PBGC becomes trustee, the plan remains ongoing under SVCMC sponsorship.
Under federal law, the maximum guaranteed pension at age 65 for participants in plans that terminate in 2010 is $54,000 per year, or lower for those who retire earlier or elect survivor benefits. Some early retirement subsidies and benefit increases made within the past five years may not be fully guaranteed.
PBGC will not have specific information about SVCMC pension benefits until it becomes trustee of the plan, when PBGC will send notification letters to all plan participants. SVCMC retirees who draw benefits from PBGC may be eligible for the federal Health Coverage Tax Credit.
SVCMC previously filed for bankruptcy in 2005 and emerged in 2007. As part of the plan of reorganization in that bankruptcy, PBGC negotiated an additional contribution of $75 million to the retirement plan and additional payments in later years.
PBGC is a federal corporation created under ERISA. It insures basic pension benefits of about 44 million American workers and retirees in more than 29,000 private-sector defined benefit pension plans. PBGC receives no general tax money. Operations are financed by insurance premiums paid by companies that sponsor pension plans and by PBGC's investment returns.
Supply chain management company MedAssets, Inc. Tuesday announced that it will pay $850 million in cash to acquire Dallas-based rival The Broadlane Group.
The Broadlane Group serves more than 1,100 acute care hospitals and 50,000 non-acute care facilities nationwide, and MedAssets serves more than 3,300 hospitals and 40,000 non-acute healthcare providers.
Using 2009 figures, the combined MedAssets and The Broadlane Group had estimated net revenue of $508.9 million and estimated combined adjusted EBITDA of $161.8 million, the two companies said in a joint statement.
"We are bringing together some of the best contract pricing in the industry, with highly complementary technology and clinical consulting expertise from both companies," said John Bardis, chairman/president/CEO of Atlanta-based MedAssets. "Our core strategy is to enable broader clinical and operating effectiveness throughout our nation's health system, and this transaction will further enhance our ability to help hospitals and other healthcare providers drive their operating and supply costs lower, while improving patient care."
Bardis said the collective strengths of the two companies will enhance MedAssets' financial profile, with recurring revenue, cash flow and profit expansion opportunities.
Patrick Ryan, chairman/CEO of The Broadlane Group, will join the MedAssets board of directors and become president of the company's Spend Management segment when the deal is finalized by the end of 2010.
"As a combined entity, we offer a strategic opportunity for our clients to drive operating expenses down while improving quality of care," Ryan said. "The collective strengths of The Broadlane Group and MedAssets will provide expanded supply chain capabilities, and further enhance the financial improvement opportunities, both near and long-term, for our healthcare provider clients."
The agreement calls for MedAssets to purchase The Broadlane Group for approximately $850 million in cash, with $725 million to be paid at closing and $125 million to be paid in January 2012. MedAssets has obtained financing from J.P. Morgan and Barclays Capital.
MedAssets said the combined company will offer:
An industry leader that can reduce hospital costs with supply chain management operations that include group purchasing, strategic sourcing, medical device or PPI cost management, centralized procurement, supply chain outsourcing, supply chain analytics and data services, lean process consulting expertise, and a clinical workforce or labor management solution;
A group purchasing portfolio that gives providers high compliance pricing and flexible contracting for commodity products and purchased services;
Software-as-a-Service-based revenue cycle technology and revenue cycle consulting and extended business office services that increase net revenue capture and cash flow improvement for healthcare providers with low upfront cost and a return on investment in months;
Approximately 85% recurring revenue with high client retention and minimal client concentration;
A national sales force and client service teams to expand use of the combined companies' services to new and existing clients;
Strategic support to help healthcare providers stay viable in the anticipation of healthcare reform and related financial/operational challenges.
