Economic Downturn Squeezes Hospitals' Ability to Borrow Money

As a result of a bad U.S. economy, a new report notes that hospitals, which employ 5 million people nationwide, could be facing uncertain times as their financial health falters and their ability to borrow funds for improving facilities and updating technology is squeezed.



The report shows the credit crunch is increasing the costs of borrowing money, making it more difficult for hospitals to find the financing for facility and technology improvements. It indicates hospitals have delayed or will delay capital investments in the near future:

• 56 percent are holding off on renovations or plans to increase capacity or considering postponements


• 45 percent are delaying the purchase of clinical technology or equipment


• 39 percent are putting off investments in new information technology

Sun Capital HealthCare, Inc. (SCH) provides a debt-free funding solution for hospitals and healthcare providers that can help alleviate the financial stress associated with not having sufficient up-front cash to meet overhead and finance necessary improvements.

Healthcare executives can use the funds generated from SCH's Medical Accounts Receivable (MAR) Funding program to improve return on investments (ROI's) by financing deferred projects, such as renovations or the purchase of needed equipment, at today's costs and seeing the benefits of their investment sooner.

HOSPITAL CREDIT RATINGS CONTINUE TO SLIDE

A recent article in H&HN Magazine ,online, noted the continuing decline of hospital credit ratings due to the economic crisis. The author, Randy Edwards, cited several experts that were interviewed for the article as giving health care administrators the following advice:

• pay attention to day-to-day business as there are new revenue sources and savings to be found


• shore up physician relationships - through effective recruitment and retention strategies

A medical accounts receivable program from Sun Capital HealthCare, Inc. can be a financial solution to reimbursement delays while at the same time ensuring a healthier balance sheet that is more attractive to the credit markets. Because SUN's program is not a loan, the provider can utilize its receivables as a cash flow solution for generating working capital rather than as an obstacle to growth and proftability. Additionally, the flexibility in SUN's MAR funding program allows the provider to use the funds to follow the above advice.

With the healthcare marketplace becoming increasingly competitive, a provider's survival as well as growth depends on an effective financial strategy and using all the financial tools available.

Obama Urged to Overhaul Healthcare, Stat

In a letter to Obama, the Business Roundtable, the National Federation of Independent Businesses, AARP and the Service Employees International Union urge that a healthcare overhaul be a priority in the administration's first 100 days.

In their letter, the groups link healthcare reform with the nation's bleak economic conditions.

Obama made healthcare reform a central plank of his presidential campaign, pledging a sweeping effort to expand coverage and lower costs. But since his victory, he has not indicated how he plans to proceed with an overhaul that could cost hundreds of billions of dollars and spark an intense political battle.

In a national radio address Saturday, Obama made a general reference to healthcare reform, listing it with energy, education and tax relief as "key priorities."

Sun Capital HealthCare, Inc. Provides Funding Solutions for the Healthcare Industry

Sun Capital HealthCare, Inc. (SCH) will participate in the Healthcare and Capital (HCap) Conference as a funding solution provider for the healthcare industry from November 19-21, 2008 in Washington, DC.

HCap is designed specifically for C-suite healthcare leaders and financial executives. The forum provides attendees with avenues to discover how they can get maximum access to capital as well as fosters creative entrepreneurial thinking about healthcare.

SCH financial professionals will be on hand for one-on-one meetings with HCap attendees to discuss how SCH's Medical Accounts Receivable (MAR) Funding program can serve as a debt-free funding solution.

With MAR Funding, healthcare providers can count on immediate and predictable cash flow without having to worry about tying up other assets or increased interest rates.

Using the Computer to Manage the Elderly and Chronically Ill Health Problems

A recent review focused on ways to motivate the elderly and chronically ill to use computers in order to learn how to better manage health problems.

It focused on health IT systems where patients or consumers interact with the technology and receive patient-specific information in return. These include home monitoring systems with interactive disease management or self-management technology, educational or decision aid software tailored to the patient's needs, online patient support groups, tailored health reminder systems where interactions are linked with personal health records, and patient-physician e-mail systems.

The elderly were defined in the study as those with a mean age greater than 65 years; the chronically ill as those with conditions such as diabetes, asthma, heart failure, chronic obstructive pulmonary disease and mental illness; and the underserved as minorities, low-income populations and those living in medically underserved geographic regions.

The review was directed by lead investigator Holly Jimison, Ph.D., an associate professor of medical informatics and clinical epidemiology, OHSU School of Medicine.

What will motivate the elderly, the chronically ill and the medically underserved to use interactive information technology systems to actively help manage their own health problems?

The Presidential Election and Your Medical Reimbursements

Once you read this article, you will no doubt know the result of the Nov. 4th presidential election. However, the medical business is the medical business! Under either administration, attempting to lower the budget deficit will first involve reimbursement reductions. Once again the medical provider will bear a significant portion of the expense toward a lower federal debt.

Neither candidate has discussed reducing the size of governmental healthcare so healthcare will still be cumbersome at best...and....if government decides to "mess with" the existing system, one can be confident to anticipate more delays, and overall less efficiency. Is this year's election unique when considering healthcare? Not really!

We have now seen the credit market virtually disappear as shown in The Wall Street Journal article dated November 4th, 2008. Medical Accounts Receivable (MAR) Funding is truly the answer for increased cash flow and funding growth/expansion to your medical practice or business. Increasing your services or products, funded by your existing and future medical claims (A/R), can mitigate decreased reimbursements by eliminating the waiting time to receive payment, without the "help" of financial institutions currently in gridlock. It also allows the provider to build a new line of services or products previously unaffordable if not for MAR Funding. A medical provider of any kind, with a continual flow of Medical Accounts Receivable as well as an existing bucket of receivables awaiting payment, can literally use the payments due tomorrow, to fund new business opportunities today. This is a real, and highly effective solution. Think about it!

Will Technology Cure Health Care — Or Kill It?

Obama has said that technology will save health care. Information technology is quickly becoming a medical resource: Google recently launched an online medical records service that claims online searches is where consumers turn first for health information.

Computerization can eliminate as much as 30 percent of medical costs that are due to inefficiency, according to Dr. Dean Ornish, founder of the nonprofit Preventive Medicine Research Institute. And advanced diagnostics will encourage prevention and reduce costly reactive treatment. Thanks to technology, such diagnostics are now within the reach of consumers. As more people test themselves, doctors and insurers may face the additional burden of just-in-case surgery and a “previvor” mentality. So, will new technology cure health care, or kill it?

Hospitals Move To Cash Investments As Short Term Pressures Mount

Under pressure from the troubled economy, hospitals are turning to their investment cash flow as a source of capital, according to a recent article in Healthcare Finance News.



Despite reimbursement delays and decreased revenue, hospitals and healthcare systems must still support costly healthcare information technology, facility upgrades and maintenance. As a result, they have focused on rebalancing their investment portfolios.



However, Sun Capital HealthCare (SCH) offers a debt-free funding program for hospitals and healthcare providers that serves as an excellent source of working capital in order to meet their financial demands.



SCH's Medical Accounts Receivable (MAR) funding program can be used as a strategic funding tool in order to:

• Accelerate cash flow by turning receivables into working capital
  
• Alleviate fiscal stress with an immediate infusion of cash


• Realize cost savings from vendor discounts and other operational improvements


• Protect credit ratings by making the balance sheet healthier


• Improve ROI's of capital programs by financing deferred projects at today's costs and seeing the benefits sooner


• Generate new revenue streams by quickly responding to market opportunities without lengthy credit applications

BASEBALL and HEALTHCARE

The Oct. 24th issue of the New York Times has an interesting article "How to Take American Health Care From Worst to First." In it the authors, Billy Beane, Newt Gingrich and John Kerry, note how the big payroll baseball teams are not in the World Series while the team with the second lowest payroll is. They attribute this to the fact that Tampa Bay uses a data-driven approach to decisions rather than the traditional approach that was based on a manager's experience and a few statistics.

The authors cite several examples that support their argument that "a health care system that is driven by robust comparative clinical evidence will save lives and money." Many other observers are also pushing an analagous approach to healthcare by emphasizing that quality of outcomes can be greatly enhanced with the use of technology, not just in new diagnostic and drug discoveries, but in communications and measurement of results to reduce human error and analyze what treatments do and do not work. Of course, a major issue in moving towards this type of approach to medicine is how will the technology be paid for, especially by the smaller hospitals and speciality services. One solution to this financial conundrum, especially with today's liquidity crunch, is through a medical accounts receivable funding program from Sun Capital HealthCare. Sun's program transforms a provider's medical receivables from a non performing asset into a cash flow solution to reimbursement delays that is not subject to the wild swings of today's credit markets.

Healthcare is like baseball in other ways as well. While the researchers and device makers often seem to be trying to hit a home run [so their stockholders can earn a return], in many ways 'small ball' can yield a better result. Reducing obesity, getting more exercise, good eating habits and focusing on prevention is a lot less costly in the long run and a lot healthier, both for the patient as well as the healthcare system.

Technology in Medicine - Emerging Trends

One of the paradoxes of increasingly powerful computer-based technologies is the declining cost and a hold out in hopes of reducing healthcare costs in future. An example of a up and coming developing new technology is the Smart Intensive Care Unit .

In an Intensive Care Unit (ICU) , heart rate, blood pressure, blood flow and other measurements are carried out routinely. The analysis of these parameters is quite time consuming for the puposes of analysis and continuing therapy. In an ICU setting, there could be wide variations of the patient's vital signs and it is critical for the nurse or doctor to be alerted quickly for deterioration of the patient's condition.

The relatively new introduction is the " Smart ICU" which contains a neural network operating on " fuzzy logic" - in simple terms this is a method to represent mathematically vague and imprecise human measures such as " almost", " very" and " quite far away" which cannot traditionally be designed in digital systems, which operate on "on-off" conditions.

It will be a major challenge for healthcare providers to keep abreast of these emerging new technologies and methods, training in their use, and budgeting for their acquisition.

HEALTH CARE REFORM

"Growing Health-reform Challenge For Next President" is the title of an article on yahoonews.

The author, Kevin Freking, discusses primarily the challenges of cost and coverage reform rather than the credit crunch in the financial markets. He aptly notes that there is a long history of failed health reforms and that the job has only gotten tougher with the financial meltdown.

Financial services companies, such as Sun Capital HealthCare, which provides debt-free funding resources to healthcare providers and suppliers, can only do so much for the industry. While cash-flow problems stemming from reimbursement delays from third party payors and the government can be mitigated by Sun's "cash flow solution to working capital needs, the underlying problems of the industry remain: a poor allocation of healthcare resources, a lack of emphasis on prevention, an aging and more obese population which will lead to greater need for healthcare resources, growing malpractice insurance premiums driving doctors away from practice, etc.

If we believe that a healthy populace is a desired goal of this country, both from the point of view of consumers of the goods and services that this nation produces and as users of healthcare services, then the whole delivery system of healthcare needs to be re-engineered, including pharmaceutical discovery and manufacturers, medical device development, and providing of medical treatment. A holistic approach needs to be incorporated, using modern management techniques, so that the national investment in healthcare is productive.

Without Reform, a Health Care Bailout May Be Needed

At this year's 23rd Cerner Health Conference, Neal Patterson, CEO of Cerner Corp., pounded home the message that a health care bailout may soon become a reality.

According to Patterson, with costs escalating, the health care industry could very well be headed for a crash that could mirror - or dwarf - the $700 billion Wall Street bailout.

"The Wall Street bailout is a one-time number," Patterson said. "To bail out health care, it is not a one-time fix. When the bailout comes...it's going to be a very gloomy day."

He predicts that some hospitals and health organizations eventually may quit honoring government reimbursement programs - he used Medicare as an example - because the programs do not cover the costs of providing the service.

Sun Capital HealthCare, Inc. to Exhibit at Medtrade Fall 2008

Sun Capital HealthCare, Inc. (SCH) will exhibit at Medtrade Fall 08 from October 28 - 30, 2008 in Atlanta, GA.

Medtrade Fall is the largest international tradeshow dedicated to the home medical equipment (HME) and durable medical equipment (DME) industry. Thousands of professionals in the industry gather together in search of products, technologies, and services that will increase their operational efficiencies and their bottom line.

SCH will have financial professionals on hand at Booth 2163 to share with HME/DME providers how SCH's Medical Accounts Receivable (MAR) funding program can accelerate cash flow and make their balance sheet healthier whether in growth mode or fiscal stress.

Sun Capital Group Exhibits At the Turnaround Management Association's Annual Convention

Sun Capital Group, Inc. (SCG) will offer an alternative funding solution at the Turnaround Management Association's (TMA) annual convention on October 27-29, 2008.

TMA is the premier professional community dedicated to corporate renewal, turnaround management, restructuring and distressed investing industry.

SCG financial professionals will be on hand at Booth 221 to share with TMA professionals how SCG can be a strategic funding source when they are in both preventative and reactive client counseling modes.

SCG's accounts receivable funding program provides an alternative funding solution that accelerates cash flow and makes a company's balance sheet healthier.

How Do These Economic Conditions Affect My Medical Business?

What are the boundaries of our recent economic catastrophe? Unfortunately, the answer tells us the boundaries are endless and there is no immunity to this financial holocaust.

Medical providers have seen (or very shortly will see) payment intervals begin to extend from all carriers. Starting with government payors, we see California and Illinois not paying for services or equipment already rendered. Other states will undoubtedly follow in the same pattern. State revenues are coming to a screeching halt with decreased tax collections, no ability to borrow in the short term and increased demand for municipal and governmental services. The federal government just committed to a $700 billion bail out of our financial institutions. One must immediately assume that, as in the past, federal reimbursements will decrease in dollars paid, and become significantly protracted.

Commercial carriers have significant exposure to the current financial woes through their investments in mortgage backed securities and derivative instruments. Logic tells us that delayed payments provide "float income" which can offset, although minimally, some of their losses. Not a pretty picture for the medical community. Solutions are few, as conventional lenders are not in that business as of now!

Medical Accounts Receivable (MAR) funding is truly the only solution. The modest discount paid for this service is worth the expense. MAR funding provides a predictable steady cash flow and up-front capital to fund infrastructure additions designed to generate additional income through additional services or products. It is the only game in town...and....coincidentally the best solution for the medical community.

Margins Squeezed? Here's Where to Find Operational Efficiencies

The current economic downturn has caught many businesses in an unanticipated margin squeeze. Healthcare organizations are no exception, with the impact being felt from the declining value of investment portfolios, reduced access to capital, increasing supply costs, and a rising proportion of uninsured patients.

Per an article in HealthLeaders Media, there is something organizations can do to ensure they are generating the margin necessary to fund future operations and investments. A margin improvement audit.

When determining a margin requirement, your target margin should be an operating margin that is sufficient to meet your board's financial performance expectations and fund future capital requirements.

In addition to operating margin, operating cash flow and existing debt service along with other sources and uses of cash should be considered. Medical Accounts Receivable (MAR) Funding is a financing tool that can generate opportunities to reduce operating expenses, increase cash flow, and boost revenue.

With MAR Funding, cash flow can be accelerated by turning receivables into working capital. Operational improvements can be attained by realizing cost savings from vendor discounts with the immediate cash generated through MAR Funding. Also, new revenue streams can be created by having the up-front debt-free cash needed to quickly respond to market opportunities as they arise.

State Medicaid Programs for Long Term Care

State Medicaid programs will spend $1.6 trillion on long-term care in the next twenty years.

Medicaid spending for long-term care will grow at a faster rate than overall health care spending, faster than Medicare, and faster than the national Gross Domestic Product.

"This report shines a spotlight on the need to better prepare for long-term care expenses and to explore ways to provide consumers with greater access to home and community based care options," said Karen Ignagni, President and CEO of AHIP. "Many Americans underestimate their risk of needing long-term care, underestimate the cost of care, and many erroneously believe they have long-term care coverage."

States with the highest projected expenditures over the next twenty years includes New York ($271 billion), California ($230 billion), and Pennsylvania ($104 billion). States with the fastest growing Medicaid long-term care expenses are Alaska (7 percent), California (6.4 percent), and Arizona (5.9 percent).

Can America's Perverse Payment System Be Fixed?

Mark Taylor, in the Sep. 26, 2008 issue of Hospitals & Health Networks magazine, asks this question in his article "Experiments in Payment". In it he discusses several new experiments in revising the payment system that are attempting to mitigate the current system, which he calls "a mess." As he and others see it, the current method provides little incentives to hospitals, physicians and other providers to work together, which in turn leads to overuse and duplication of services, as well as often neglecting preventive services and chronic disease.

The overriding principle in these experimental payments systems is to provide financial incentives based on quality measurements. But how do you measure quality? Is it strictly what happens during the patient stay, or thirty days after discharge, or 6 months after discharge? If your incentives are based on post-discharge results, how do you adjust if the patient does not follow the post treatment plan the physician or hospital designated? And if you bundle payments, how do you allocate the payment to the various providers? All tough questions.

While there is no question there needs to be remedies to the current payment system to provide incentives for delivering quality treatment, there is more important problems to address to get control of the healthcare system. First and foremost, preventive medicine must be emphasized. Political leadership, both in the public and private sectors, needs to get on the bully pulpit to drive this message and dollars must be invested to back up this message and change behavior.

Fraud must be reduced and the system must be redesigned so that malpractice considerations and insurance companies are not driving medical practice, which often includes unneccessary tests and procedures, which further increases the risk to the patient. We need to get some control over medical and pharmacutical research by addressing the question - at what point do we spend billions of dollars to add one or two months of life expectancy?


Healthcare reform has to be re-engineered from top to bottom. Experiments in the payment system are only one small step in the process.

Home Remote Patient Monitoring

The home remote patient monitoring sector of the healthcare industry is an emerging market that suffers from a lack of reimbursement policy support. However, despite such obstacles, several key growth trends will counteract negative factors and lead to strong definitive growth.

Successful exploration and implementation of new payment strategies focus on bottom-line cost savings. In addition, new market participants are expected to increase demand and the need for home remote patient monitoring services in the near future.

GE Healthcare, a business of General Electric Co., is entering a potential $5 billion market providing health monitors for the elderly who live alone.

What Type of Third Party Claims Do Not Qualify for MAR Funding?

To determine if a medical provider can qualify for MAR funding, the focus must not be on the provider's services or goods, but must always look toward "who the payor is." We should examine the qualities of a payor that qualifies for MAR funding first. Examples of such companies are Aetna, Cigna, United Health, Blue Cross/Blue Shield, GHI Medicare (gov't) and Medicaid (gov't).

What makes these companies appropriate for MAR funding? These insurance companies have: 1) contracts with providers and therefore are directly paid by the carriers

2) pay "out of network" reimbursements to those patients who use providers that are not "in their plan." BUT...in all cases, they carry medical coverage which has virtually limitless patient funding amounts, and are not contingent upon legal outcome or compensation-board approval.

So we ask, is a Chiropractor (for example) able to use MAR funding? The answer is YES...however, that provider can only sell the claims of "traditional" type carriers as exemplified above. Unfortunately, Chiropractors usually have the majority of their payors as workers compensation or personal injury carriers. These cannot be MAR funded as the payment has a contingency on it, and there is no contract, or obligation to pay until such adjudication is reached. Suppose the Chiropractor is predominantly paid by Medicare, then we have a MAR funding opportunity.

The case can be made however, that personal injury carriers are insurance companies, and therefore can be used in MAR funding. Correct, however the contracts under which patients get reimbursements are auto or casualty contracts, and not medical coverage, refuting that theory.

Suppose a provider has both traditional carriers and some workers compensation/ personal injury, will the MAR funding company entertain that kind of provider? Yes! The MAR funding company will purchase only those claims paid by the traditional payors!

To see if you qualify for MAR funding...look to the payor!

Sun Capital Group, Inc. Honors Employees

Sun Capital Group, Inc. (SCG) recently awarded their 5-year to 10-year employees with a special gift to celebrate their dedication and commitment to the company.

22 employees received brass pins with white stones symbolizing the number of years each employee has been with SCG.

To date, SCG has funded billions of dollars of accounts receivables for their clients in the commercial, government and healthcare industries.

SCG clients utilize SCG's accounts receivable funding programs to generate an immediate cash infusion and reduce dependency on debt-incurring bank loans and lines of credit as their sole source to obtain working capital.

Doctor Owned Hospitals

"Doc ownership takes a legal hit" is the title of an article posted on 9/15/08 at Modern Healthcare.com. It has an interesting discussion of the legal issues involved in the on-going competition between physician owned hospitals and competing hospitals.

The decision to dismiss a suit against Baptist Hospital in Little Rock by a group of physicians who own a competing cardiology clinic was based on a technicality. Nonetheless, the issue is continuing to create debate within the healthcare community nationally.

In my opinion, doctors should be doctors, not owners of hospitals, for several reasons.

1. The potential conflict of interest when the doctor admits a patient to a facility. Does the doctor's facility provide the same level of service as the competing hospital? Will it have the same degree of emergency facilities immediately available if there is a problem? Will the financial incentive of admitting the patient to the doctor's hospital override the possibility that the competing hospital will be better for the patient? Not easily answered questions are they.


2. The most likely groups of doctors who would open hospitals would be the specialists who have the most profitable practices. Consequently, they would siphon off most of the profitable patients from the competing hospitals, leaving those hospitals with a patient mix that will bring additional financial burdens.


3. It is hard enough to run a healthcare facility with all the challenges, fiscal constraints and competing demands of the healthcare industry - just ask any hospital CEO - without having the extra burden of managing a hospital that could conceivably make them less effective doctors.

The healthcare industry - the challenges never end!

Congress, AMA Mull Better Ways for Medicare to Pay Doctors

Congress, AMA Mull Better Ways for Medicare to Pay Doctors.

The way Medicare pays doctors is a mess. Every year or so, an automatic pay cut looms, and Congress scrambles to come up with a last-minute, temporary patch to block the cuts. The most recent scramble ended in July, when Congress overrode a presidential veto to pass a patch that runs through the end of next year.

Everybody knows this is a silly way to run things, but nobody’s managed to come up with a better alternative. At hearing in Congress yesterday, a few key players tried to move in that direction.

Several key figures are trying to make some changes.

Miami Physicians Confess to Scam Medicare of $6.8 Million

Miami physicians Carlos Contreras and Ramon Pichardo pled guilty last week to defrauding the Medicare program in connection with a $6.8 million HIV infusion fraud scheme.

Contreras admitted that, from November 2002 through April 2004, he conspired with others to submit approximately $6.8 million in fraudulent Medicare bills, he signed documents containing false information about treatments purportedly given to HIV-positive patients and he approved medically unnecessary treatments at CNC.

He also admitted that the clinic received approximately $4.2 million from the Medicare program as a result of his and his co-conspirators' conduct. In November of 2002, Contreras entered into an agreement with Carlos Benitez, Luis Benitez, Thomas McKenzie, Pichardo and others to operate CNC as a fraudulent HIV infusion clinic.

According to federal officials, Contreras admitted that the Benitez brothers would refer HIV-positive Medicare beneficiaries to the clinic, provide staff members to work at the clinic and transport patients to CNC in exchange for a substantial share of CNC's profits.

In addition, they said, Contreras was aware that the patients referred to CNC by the Benitezes were paid cash kickbacks in exchange for visiting the clinic and allowing their names to be used to bill the Medicare program. He also agreed to approve expensive and medically unnecessary HIV infusion claims at the clinic, and to falsify medical records.

THE CHALLENGES FOR NON-PROFITS

"A variety of emerging or intensifying factors threaten the future performance and credit quality of the nation’s not-for-profit health care system. Growing concerns include “unquenchable demand” for health care services and related growth in new health care technology and health care costs, the sustainability of managed care rate increases; the slow erosion of employer-based health insurance; reductions in Medicaid eligibility and reimbursement; the growing burden of rising bad debt and charity care; the government’s long-term ability to adequately fund Medicare without future reductions; and the availability of an adequate and affordable labor supply."

The above statement from the 'Environmental Scan' in the current [9/11/08]issue of H&HN magazine paints a foreboding picture for non-profit providers of healthcare. Demand for healthcare is increasing due to increasing demographic trends while the costs of developing new technologies, medications and operational costs for delivering those services are also increasing. Coupled with the financial pressures on Medicare and reimbursement cuts, it is apparent that the healthcare system is in crisis.

Where will the capital that is needed to address these issues come from? As the article indicates, performance determines the quality and amount of credit. And banks are reluctant to lend money when financial performance [profitability and balance sheet ratios] does not conform to their expectations and willingness to accept risk [the exception being the subprime mortgage market...but that is another story]. And since equity is not a viable option for non-profits, the delivery of healthcare to the most vulnerable segments of the population is at risk. Non debt or equity financing, such as that provided through Sun Capital HealthCare's Medical Accounts Receivable funding program, is a tool to both increase working capital and reduce the financial impact of cash flow problems resulting from reimbursement delays. Even though Sun Capital has kept the lights on and doors open for facilities in fiscal crisis, as well as provided the means for hospitals to grow, until the issue of rising costs is adequately solved, the scary prognostication outlined above will continue.

Congress to Delay Health Care Overhaul

Congress is likely to delay a health care overhaul. They will continue needling health care companies and likely to bide time on major reforms.

Democrats have launched probes of some of the country's largest drugmakers and passed laws curbing marketing tactics used by insurers. Analysts expect those efforts to continue this fall while party leaders begin laying the groundwork for broader changes after the November elections.

With a Democratic administration and Congress next year, analysts say the slowing economy, rising food and gas prices, and new tensions with Russia will take precedence over health reform.

How Do Municipalities Handle Cash Flow Challenges?

Over the past few weeks we have seen state medical agencies (Medicaid) curtailing their provider reimbursements. A common theme nationwide, providers of all kinds are suffering from "the budget has not been passed yet" disorders. How do state agencies expect a medical professional to care for patients, pay for supplies, pay rent, buy new and updated equipment and feed his/her family? State agencies should know better!

It is interesting to note that when state or local municipalities have short falls in cash flow, they can and usually issue very short term bonds (tax free to investors) called "revenue anticipation notes" (RAN's), "tax anticipation notes" (TAN's), and "bond anticipation notes" (BAN's). These securities are issued specifically to fill the cap created by short term cash flow deficiencies, and once the main source of funds arrives (the "revenue" "taxes" or "bonds") the short term notes are paid off. Municipalities have such abilities, but providers do not.

So what do providers have to fill the cash flow gap? Medical providers can use a strategy very similar to "revenue anticipation notes." A provider can sell his/her medical claims in anticipation of payment, through MAR (medical accounts receivable) funding. The sale of these anticipated payments can only be done through a finance facility specifically accustomed and designed to buy these receivables.

So the question is answered...medical providers can use the same strategy that municipalities use. A revenue anticipation note issued by cities, states and counties is a debt instrument. MAR funding is not! It is the sale (not borrowing) of the asset in anticipation of payment by a third party payor. If doubt arises when considering MAR funding, think for a moment....municipalities do something very similar almost every month!

Hospitals Battle With Competing Health Care Proposals

Mid Coast Hospital recently proposed a new $3.5 million urgent care and diagnostic center as an alternative to a proposed alliance with Parkview and Central Maine Medical Center (CMMC) made earlier this year.

In an effort to overcome financial challenges and ensure a continued ability to meet current and future community health care needs, Parkview announced their plans to join forces with CMMC in June '08. However, Mid Coast hospital contends they are prepared to meet the health care needs of the entire mid-coast region with a plan that will cost an estimated $18.5 million per year less than what it would cost CMMC to continue to operate Parkview hospital.

Parkview officials called Midcoast's assertion "absurd" saying that Midview's proposed urgent care and diagnostic center isn't about integrating care and saving the community money - it's about trying to run Parkview out of business.

According to health care financial analysts, the battle between these two hospitals comes as no surprise. Before Mid Coast built their current hospital, it was in the courts for four years being fought out between them and Parkview.

"AN EXCELLENT INVESTMENT"

This is the title of an interesting article that appeared in the May 2008 issue of HHN Magazine by Michael Bilton. It is not about finances, although in a way it ultimately is. Rather, the author points out that an "annual community health assesment" can be a valuable tool for a hospital's planning. By understanding what the healthcare needs of the community are, a healthcare executive can plan a strategy and allocate financial resources towards those programs for which there is the greatest demand in the community.

Identifying the needs of your marketplace so that you can target your services towards meeting those needs is one of the basic principles of running a business. Borrowing this strategy from the business world can enable healthcare executives to better develop service lines and prevention programs that will increase their market share and enhance their financial performance.

And when it comes to financial performance, healthcare executives are increasingly using another tool used in the general business world - accounts receivable financing. The unique medical accounts receivable funding program from Sun Capital HealthCare, Inc. has proven itself to be a valuable tool for healthcare organizations in fiscal stress as well as those poised for growth and profitability.

Declining Liquidity = Low Bond Ratings for Hospitals

Per a recent statement made by Standard & Poors (S&P), hospital bond ratings across the U.S. have plummeted due to continued declines in liquidity.

Because interest rates are based upon the creditworthiness of the issuer and the conditions in the financial market, many hospitals and healthcare providers are finding it more and more difficult to get and maintain a positive bond rating.

SCH's MAR Funding program can provide a much needed boost to hospitals' and healthcare providers' credit ratings. MAR funding is not dependent on the availability of credit and serves as a source for working capital that can actually be used to improve liquidity.

By using the cash flow generated from MAR funding as working capital, profitability can be restored and a healthier balance sheet can be attained.

Medicare Improvements for Patients and Providers

The Medicare Improvements for Patients and Providers Act of 2008 enacted July 15, 2008 created changes to the Medicare program. These changes have been communicated to affected parties (such as - physicians, therapy services, DMEs).

As a result of the new law, the mid-year 2008 Medicare Physician Fee Schedule (MPFS) rate reduction of -10.6% is retrospectively replaced with the fee schedule rates in effect from Jan - June 2008, which reflected a 0.5 percent update from 2007 rates. Additionally, MPFS payment rates are being revised to increase the fee schedule amounts for certain mental health services. More information on physician pay issues is available at Centers for Medicare & Medicaid Services (CMS).

Under the Medicare statute, Medicare pays the lower of submitted charges or the Medicare fee schedule amount. Claims with dates of service July 1 and later billed with a submitted charge at least at the level of the January 1- June 30, 2008, fee schedule amount will be automatically reprocessed. Any lesser amount will require providers to contact their local contractor for direction on obtaining adjustments. Non-participating physicians who submitted unassigned claims at the reduced nonparticipation amount also will need to request an adjustment.

CMS will be implementing other provision of the legislation in the coming months and will announce additional information as it becomes available.

A Need for MAR Funding

"I have a wonderful opportunity to provide additional services (or products) for my patients, but I have no financial ability to fund the build-out needed to accomplish that task." If you have said that, or even thought it, you have a major symptom indicating a need for MAR funding.

The way for any medical provider to increase profitability is to provide services or products for his/her patients that previously were outsourced or referred out. Not many medical providers realize that they have a cash bucket available for such expansion. The laziest asset any business has is its accounts receivable.

Medical providers, depending on their practice-type and size can have as much as a million dollars (or more) in medical claims awaiting payment at any given time. What a great source for financing expansion or growth. MAR funding will give the provider the financial tool needed for such expansion and will not eliminate or reduce his/her cash flow.

Pekin Hospital in Good Financial Health

Despite indications of financial troubles in the spring, the new CFO of Pekin Hospital says they are doing just fine.

The hospital plans to make use of an internal physician recruiter to replace physicians in normal staff turnover and new positions as one of the ways to keep their hospital competitive and profitable.

One of the hospital's biggest challenges is that of maintaining a positive image. Patient satisfaction is critical to the hospital's success; therefore, Pekin is looking for new ways to attract top notch physicians to help maintain this standard.

By using Medical Accounts Receivable (MAR) Funding as a source to generate working capital, Pekin hospital can use the immediate cash to upgrade technology and keep the hospital looking attractive for physicians and patients alike.

Large Increase in Number of Companies At Risk of Defaulting On Their Debt

The August 19, 2008 issue of The American Bankruptcy Institute Update reviewed comments from credit rating agencies which indicates that the number of companies most at risk of defaulting on their debt has soared this summer due to a decrease in consumer spending and the on-going credit crisis.

• In a recent report, Moody's Investors Service stated that 63 companies had the weakest liquidity rating and were in danger of defaulting on their debt. This is an increase of almost 19% in just one month.
• Recently, Standard & Poors listed 156 companies as most at risk of default...its highest total since May 2003. S&P went on to state that these companies are at risk of defaulting of $352 billion which is three times the last month's total.
• S&P also reported that as of August 11th, 52 companies have defaulted on debt worth $41 billion.

The financial community expects the current credit crisis to continue for some period of time. It is expected that the number of companies which will actually default on debt to increase substantially in the coming months as they struggle with low liquidity. It should be noted that many of these companies are not using one of their best assets, their accounts receivable, as a source of working capital as they face default. Many companies could reduce the risk of defaulting on their debt by selling their accounts receivables.

Healthcare companies can also benefit from a specialized form of A/R funding called MAR Funding. MAR Funding enables healthcare companies to sell their third party claims and receive cash right away instead of waiting 30, 60 or 90 days for reimbursement.

HEALTHCARE REFORM TO HIT THE AIRWAVES

Viewers watching the upcoming nominating conventions will see a new advertising campaign advocating for healthcare reform, as reported in AHA News. Backed by some major healthcare associations, the effort is meant to provide impetus and urgency to tackle this major component [as much as 15% of GDP] of this country's economy.

Providers, suppliers, financial services companies, as well as consumers all have a stake in finding a new approach to making quality healthcare affordable and accessible throughout the country. The vested interests for maintaining the status quo might finally be challenged so that "business as usual" will no longer be the case when the next administration comes into office.

Record shattering deficits, an ill conceived war sapping our energy and resources, trade imbalances, a weak dollar, the crisis in the financial markets, global warming, energy independence, social security reform, are all huge problems that will advocate for time and money in the corridors of power in Washington. The healthcare industry will have to compete with all these issues to get the priority level and financial support needed in Washington to deliver our industry's services much more efficiently and effectively to a growing population that lives longer and places more demands on the industry.

Hopefully, the ad campaign will focus on heightening the awareness of and urgency to find better ways of delivering healthcare. Now is not the time to advocate any single approach as that will only enable the entrenched interests to divide and conquer and maintain the status quo.

When Does a Healthcare Provider Need MAR Funding?

Since the introduction of electronic billing capabilities, medical practitioners have seen their cash flow improve significantly. However, in many cases, the improvement has just moved the problem from horrid to bad.

Electronic billing works well if all the entries are correct and additional medical information is not required by the carrier. Given any of these two events, reimbursements once again become protracted. What is the indication then, which alerts the medical provider to seek MAR funding? The most common symptoms are the following:

1. Struggling to make payroll
2. Being forced to delay payments to vendors
3. Using a personal credit card for business expenses
4. Feverishly opening envelopes to find checks for working capital

Experiencing any of these symptoms is a sure indication that your cash flow is not what it could be. MAR funding gives predictable, steady cash flow and is the only form of finance that grows and coincides with your billing cycle. So, if you see approximately that same number of patients in a day, you can almost guarantee your cash flow for that day with the use of MAR funding.

New Law to Help Warn of Hospital Financial Crises

A new law enacted in New Jersey will require that an early-warning system is in place to help spot financially troubled hospitals before it's too late.

This year alone, four hospitals in New Jersey have closed due to financial woes. A fifth hospital will close its doors on Wednesday.

The new law will give the NJ Department of Health and Senior Services the authority and access to information necessary to monitor hospital finances. The department will then be able to identify financially troubled hospitals long before a crisis occurs.

Hospitals across the country facing similar financial crunches should strongly consider adding Medical Accounts Receivable (MAR) Funding to their financial portfolio. MAR Funding provides an immediate infusion of cash which can be used especially when a hospital or healthcare provider is under fiscal stress.

HEALTHCARE IN A LOUSY ECONOMY

Jeff Lutz describes 6 lessons to be learned about the healthcare industry in a lousy economy in the August 14, 2008 issue of H&HN magazine .

1. Healthcare isn't immune to economic cycles - witness the auction bond market


2. The payer mix changes - co-pays and deductibles are up and fewer people are covered by commercial insurance


3. As the self-pay portion of the bill rises, bad debts increase


4. Hospital volume drops off, especially the "good stuff" - as insurance costs increase and unemployment increases, families use less health care and more ER facilities


5. Everybody is expanding geographically to capture market share - increasing marketing and advertising costs to meet the increased competition


6. Mergers happen more quickly - because hospitals lack the financial muscle to ride out the economic downturns

On an upbeat note, Lutz does note that while hospitals are not happy with their profit margins, those with strong balance sheets are able to invest in physicians, services and technologies and position themselves for the future when the economy turns.

Many healthcare and financial commentators also notes those healthcare organizations that have strong balance sheets are better able to survive the fluctuations in the financial markets. A key to a strong balance sheet is managing debt and controlling your financial ratios. One tool healthcare executives use is a Medical Accounts Receivable funding program from Sun Capital HealthCare Inc.

The cash infusion that you receive from Sun Capital is debt-free and without the restrictions normally associated with bank loans and lines of credit. As Lutz indicates, by having a strong balance sheet, healthcare organizations in a lousy economy can improve their performance and more readily survive the financial fluctuations of a lousy economy.

California Freezes Medi-Cal Payments

California freezes Medi-Cal payments to thousands of healthcare facilities in July.

Medical providers who care for low-income Californians are scrambling to find funds to keep their doors open, as the failure of lawmakers to pass a budget forces the state to halt payments to them.

Most of the facilities have no immediate plans to turn away patients, the providers warn that a budget stalemate that drags on through the summer will affect care. In the meantime, they are turning to banks, foundations and their own reserves for emergency cash to pay the bills.

During last year's budget standoff, many providers reported paying astronomical interest rates for temporary credit. This year promises to be just as tough. Banks are financially squeezed and reluctant to offer bridge loans. Medical Accounts Receivable (MAR) funding may be the answer for some.

A Financial Tool That Protects Your Business From Fluctuations in Revenue Cycle

Fluctuations in revenue cycle is a common dilemma for healthcare providers as they strive to maintain inventory, pay overhead, expand, and even make a profit.

To address this issue of "fluctuations in revenue cycle", you must ascertain whether the financing tools available move concurrently with your revenue stream, since cash flow is determined by your revenue cycle, not your billing cycle.

Loans, including lines of credit and asset based lines, have a common limitation to solving the dilemma. Dollar availability is fixed and cannot be reused until some portion (or all) is paid back.

Selling stock is another financing tool. However equity financing addresses long term financial questions and is not typically used as a solution for short-term cash flow problems resulting from revenue cycle fluctuations.

A financial tool that directly follows the revenue cycle is Medical Accounts Receivable (MAR) Funding. It provides a cash-flow solution to your working capital needs. Simply put, you deliver your product or service and get paid within 24-48 hours. There are virtually no limits on the amount of funding available and no requirements before you can receive additional funding.

Hospital Borrows and Loses Millions

Carilion Clinic is losing and borrowing millions as it converts from a hospital to a clinic system.

Construction and recruiting physicians to support the changes has taken a toll on Carilion's bottom line. That, combined with other expansion projects, a down economy and a volatile market, has Southwest Virginia's largest hospital system reporting a $39.7 million loss for the first six months of the fiscal year.

Hospital revenue bonds worth $50 million and $110 million were issued July 1 for Carilion. Of the $160 million, Carilion has already spent $52 million, according to a bond prospectus dated July 8.

Another source of obtaining working capital to fund Carilion's capital improvement projects is Medical Accounts Receivable (MAR) Funding. MAR funding is a customized funding program for healthcare providers/suppliers. By using the funds generated from MAR Funding, no debt is incurred allowing for a healthier balance sheet and an opportunity to improve credit rating when additional bond issues are under consideration.

Hospital Closings - So Who Cares?

Emily Friedman has written a blistering article in the August 6th issue of H&HN Magazine on the subject of hospital closings, one that I would suggest anyone with an interest in the healthcare system should read. She paints a bleak vision of the future, unless something changes in the way we view the delivery of healthcare to our citizens. While covering hospital closings for 30 years, she sees some common factors in the current spate of closings that "...are frightening as they are disheartening."

The first factor she cites is "market mania", the idea that market economics will make the healthcare system work for everyone. But, she notes that the "...economics of healthcare, far from being humane, have become Darwinian" with its reliance on a market ideology that, in her opinion, is a failed ideology. Unless, as she notes, "....you think that it's just fine to have 16 boutique hospitals in every wealthy suburb while people in poor communities die for lack of basic emergency care."

The second factor she discusses is "a lack of anything resembling planning." As Ms. Friedman notes, "...we plan golf-course communities, downtown renaissances, parks, transportation systems, olympic sites and public bathrooms; surely we can find a way to have at least a semi-rational distribution of hospital resources."

Ms. Friedman cites a number of other factors that have contributed to what she clearly feels is a critical turning point for the healthcare industry. With the growing disparity between the "have" and "have not" hospitals in terms of revenues, margins and access to capital, the "...question is whether the luckier hospitals feel any obligation to those that are vulnerable" and, I would add, do the well-to-do patients feel any obligation to those less fortunate.

Those of us on the business side of healthcare, such as Sun Capital HealthCare, Inc. which provides medical accounts receivable funding, can address financing for the healthcare industry, but as Ms. Friedman points out, there is a more profound question that the country as a whole must resolve and that is what do we want our hospital and healthcare system to be.

Medicare Bill Could Lead to Tougher Hospital Inspections

The new medicare bill could lead to tougher hospital inspections.

In 1965, the year Medicare and Medicaid legislation was passed, Congress gave the “Joint Commission,” a professional accreditation organization established in 1951, the unique authority to inspect hospitals and determine whether they meet the patient health and safety standards required to treat Medicare patients.


Today, the Joint Commission collects $113 million in annual revenue, mainly from the fees it charges hospitals for telling them whether they comply with federal regulations. The hospitals that are inspected are the ones that foot the bill to be accredited and 99% of the hospitals that are inspected by this entity are generally accredited.


Thanks to the Medicare bill that Congress passed earlier this month, however, the Joint Commission will no longer enjoy unique authority over hospital inspections.

CMS Proposes Rules for New Rates

CMS just released a proposed rule to update its approach for paying hospital outpatient and ambulatory surgery center services.

The new rates are based on a 50-50 blend of the 2007 payment rate and the 2009 payment, which represents 65 percent of the hospital outpatient rate.

According to CMS, the proposed rule will build on efforts across Medicare to transform the program into a prudent purchaser of healthcare services, paying based on quality of care, not just quantity of services.

The new rule would include a 3 percent annual inflation update to Medicare payment rates for most services that would be paid under the outpatient PPS. That increase would apply to hospitals that report data on seven outpatient quality measures. Facilities not submitting the data would receive only a 1 percent update.

More than 4,000 hospitals and community mental health centers are expected to participate in the program in 2009.

Healthcare Turnaround Industry Expected to See an Increase

As profitability trends continue to slope downward for the healthcare industry, turnaround professionals are expected to be called upon.

The capital markets will soon not be a viable source of revenue for the healthcare sector as debt burdens continue to increase due to rising labor costs, the growing number of uninsured patients, and lower Medicare reimbursements.

Many turnaround professionals are advocating Medical Accounts Receivable (MAR) Funding as a funding alternative for the healthcare industry. MAR Funding serves an an ideal financial strategy for quick cash infusion that can begin turning revenue quickly.

Universal Health Care Is Possible -- With No Premiums or Deductibles

Universal Health Care Is Possible -- With No Premiums or Deductibles

Imagine a proposal for health care reform that guarantees free, high-quality health care for all Americans. No premiums. No deductibles. In this plan, the government insists that all insurers offer the same comprehensive benefits to everyone, including: office and home visits, hospitalization, preventive screening tests, prescription drugs, some dental care, inpatient and outpatient mental health care, and physical and occupational therapy.

If this sounds too fantastic to be true, you need to read Healthcare, Guaranteed: A Simple, Secure Solution for America by Dr. Ezekiel Emanuel. He offers a bold, refreshing plan for health care in America. The beauty of his proposal is four-fold: It faces up to the fact that reform won't pay for itself, and it offers a funding mechanism that is fair and efficient and could deliver high-quality care nationwide. It regulates insurers, forcing them to concentrate on quality. Finally, and perhaps most importantly, this plan insulates our health care system from the lobbyists who, today, have far too much control over our health care system.

MAR Funding Underwriting Benefits

Aside from the many benefits already discussed throughout these blogs, still more benefits can be found in the unique and precise manner in which Sun Capital HealthCare, Inc. (SCH) underwrites a prospective client. One would certainly ask "how can underwriting benefit my medical business/practice?"

SCH's underwriting/audit staff performs its duties for the benefit of SCH in order to determine, net collectible amount per code and carrier and to affirm strong and consistent systems and controls used by the applicant. Although SCH receives the voluminous results of each audit performed, the data and results determined can be of extreme value to the medical provider. SCH's staff has experience in finance, accounting, coding, medical compliance and business administration. So often, the audit determines that better front office controls are needed to affirm ample and proper insurance coverage. The practitioner or business owner quite often is not aware of these deficits and, following the SCH audit, will take corrective action to remediate such situations.

During past audits the SCH team has found that some in-network reimbursements have been paid at lower dollar amounts for no reason. Carriers sometimes make these errors and do not follow their own fee schedule. SCH has recovered literally tens of thousands of dollars in adjustments for the medical professional by just auditing in-network reimbursements. Once again, this is not SCH's primary business model; it is not a recovery company.

The underwriting process in most cases is free of charge with no up-front fees. The medical professional gets a free x-ray of his/her business and can gain by this process alone. Reimbursement amounts brought to the practitioner by SCH, may actually provide that business owner the ability to decline certain procedures due to low reimbursements by all carriers.

MAR Funding has many benefits, but even the process of qualifying can provide medical practitioners/owners with invaluable information and insight.

Current Economy's Trickle Down Effect On Hospitals' Finances

Rising health insurance deductibles, soaring drug co-payments and explosive gas prices are all having a trickle-down effect on hospitals' financial positions across the U.S.

The trend has meant more patients delaying procedures and preventive care, more uninsured patients, and less reliable payment methods - all of which can put a squeeze on hospital finances.

The current trends may represent a fundamental shift in health care and hospitals will have to come up with ways to plug revenue drains and generate more income.

Medical Accounts Receivable (MAR) Funding can be utilized by hospitals and healthcare providers as a way to increase revenue and reduce costs. It can be used to accelerate cash flow by turning a non-performing asset, accounts receivable, into working capital. MAR Funding also allows healthcare providers/suppliers to take advantage of cash discounts and/or quantity discounts as well as other cost savings from vendors. It is often used to fund various management tools which can reduce overall costs of operations.

A HEALTHY BALANCE SHEET

Jeff Lutz, in the July 23, 2008 issue of H&HN magazine, discusses the Detroit healthcare market in a lousy economy. He discusses several lessons for healthcare from the events that are occuring in his hometown market due to the bad economy.

He does, however, strike an optimistic note at the end when he notes "...those with strong balance sheets are picking up market share and investing in physicians, services and technologies for the future."

Once again, it seems that the mantra for success in the healthcare business, whether in good times or bad, is having a healthy balance sheet. The best prescription for being healthy is to effectively use all the tools available and find the best combination that works for the provider's specific situation. One of those tools should be Medical Accounts Receivable {MAR} funding. It is a debt-free method to fund working capital and accelerate your cash flow. The flexiblity of a Sun Capital HealthCare MAR Funding program allows you to determine the dosage that works best for you when in combination with the other financing options you have.

A healthy balance sheet gives the healthcare executive the maximum flexibility for finding growth and profitability. And the Sun Capital MAR funding program can be customized to your specific needs.

World's Largest Collaborative Online Encyclopedia of Medicine and Health

World's Largest Collaborative Online Encyclopedia of Medicine and Health.


The Medpedia Project announced the formation of the world's largest collaborative online encyclopedia of medicine called Medpedia. Physicians, medical schools, hospitals, health organizations and public health professionals are now volunteering to collaboratively build the most comprehensive medical clearinghouse in the world for information about health, medicine and the body. This free public site will officially launch at the end of 2008, and a preview site becomes available today at http://www.medpedia.com/.

The Medpedia Project is an extraordinary global effort to collect, organize and make understandable, the world’s best information about health, medicine and the body and make it freely available on the website Medpedia.com. Physicians, health organizations, medical schools, hospitals, health professionals, and dedicated individuals are coming together to build the most comprehensive medical resource in the world that will benefit millions of people every year.

Medicare Pays Millions to Fraudulent Billers

A recent congressional investigation discovered that CMS paid nearly 500,000 fraudulent claims. Between 2000 and 2007, CMS "reimbursed" numerous medical equipment providers who used dead doctors' Medicare numbers to write prescriptions and order equipment.

The Senate Permanent Subcommittee on Investigations estimates that somewhere between $60 million and $92 million was lost to fraud.

Per a statement made by Herb B. Kuhn, CMS's deputy director, CMS has taken steps to implement policy changes and new procedures so that invalid or inactive PIN's are not used by unscrupulous DME providers in the future.

COST vs. VALUE

I listened to an interesting discussion on public radio this morning while in my car. Ths issue was the state of cancer research and treatment. One of the comments made by a doctor was that too often when discussing alternative treatment plans with patients, the medical professionals fail to adequately discuss the likely outcomes. Costs and side effects are readily understood and communicated. However, since the various therapies are not curative but rather life extending, it is a difficult decision to make when you consider the "value" of adding 3 months to a life when the "cost" of the treatment can financially destroy a family.


Cost versus value...a balancing act.

Cost versus value is also a balancing consideration at the provider level, especially when looking at alternative financial solutions to the fiscal issues facing hospitals, including equity, debt and Medical A/R funding. Equity solutions are not always available, nor are they available to all providers [e.g. non profits]. Debt financing solutions can be less costly than A/R funding solutions, but they aren't necessarily the best "value" solution when the "hidden costs" of debt or bank financing are added in. The most effective financial solutions for healthcare financing should involve a combination of these three financial tools. By having a balanced financial portfolio, including debt financing, Medical Accounts Receivable [MAR] funding programs from a company like Sun Capital HealthCare Inc. , and equity financing where applicable, the healthcare provider will be well positioned for having a healthy balance sheet and financial results.

Ratings Drop as Hospitals Bleed from Bottom Line

Per recent reports, bond ratings for hospitals have dropped significantly.

In many of these cases, the reasons for the downgrades were similar - big operating losses in fiscal 2007, declining patient volume, and concerns about the hospitals' ability to turn themselves around.

Medical Accounts Receivable (MAR) funding presents an opportunity for hospitals and other healthcare providers to protect and maintain bond ratings. MAR Funding boosts liquidity which makes for a healthier balance sheet.

A Cardiology Practice Benefits From MAR Funding

A cardiology practice consisting of 5 physicians contacted Sun Capital HealthCare (SCH) to see if we had any thoughts on how to maintain their income in an environment of decreasing reimbursements and higher operational costs. Our suggestion was simple, they should provide other services and/or procedures during the same working day in order to increase revenue.

As a cardiology practice, over 75% of their patients get annual stress testing, which the practice did not perform. They used a local stress testing lab. Wouldn't revenue geometrically increase if they provided that procedure and billed the full fee rather receiving a small referral fee? Unfortunately, there was no additional equity available to build such an addition.

SCH suggested the use of the group's laziest asset, their existing accounts receivable. Close to one million dollars in A/R was sitting on their balance sheet doing nothing. SCH opened the account and purchased the existing A/R to provide the large infusion to set up the lab.

On a daily basis thereafter, the cardiology group sold their daily billing to SCH in order to level out cash flow and eliminate expense pressures. The result, almost double the existing income was created simply by using the laziest asset in any business, accounts receivable.

HME Providers Forms Vendor Alliance With Sun Capital HealthCare

Sun Capital HealthCare, Inc (SCH) has been selected to join HME Providers' vendor alliance program as a preferred provider of Medical Accounts Receivable (MAR) Funding.

Members of HME Providers will be able to benefit from SCH's customized service which serves as a debt-free funding solution for healthcare companies. HME/DME providers can use MAR Funding as a source of working capital to create a monthly cash flow, meet payroll and overhead, reduce debt and cut costs by using cash discounts, as well as for a variety of other funding needs.

HME Providers currently offers more than a dozen vendor business-to-business alliances and passes all special program savings onto their members.

How MAR Funding Has Worked For Various Providers

A quick case study of a very satisfied Sun Capital HealthCare (SCH) client can provide you with a "real life" example of how MAR Funding can be of use in your medical practice, business or facility.

Our most recent success story starts with a group of "walk-in" clinics in the southwest. Cash flow and growth challenges brought the practice manager to SCH for solutions. After evaluating the practice and determination of their net realizable fees, SCH advanced on the practices's existing bucket of receivables providing a "cash infusion" for the purchase of new, and updating of existing facilities.

Cash flow was previously so unpredictable that bank lines were used and unfortunately could not be paid back in time for the next payroll need. The bank called the line and the pressure was unbearable.

SCH paid off the bank line, and provided the level, predictable and useful cash flow needed to make payroll, pay for supplies and overhead. SCH is proud to be an important part of the growth and survival of this profitable practice. Read another SCH success story.

Rethinking Patient Flow

Joe Flower wrote a very interesting article "Change The Model" in the July 9, 2008 on-line issue of H&HN Magazine, discussing the increasingly difficult climate for hospital survival. In it, he notes that while capital is necessary to a provider's growth and success, "the most important input a hospital needs is patients". And the critical factor in patient flow is the primary care physician.

However, he notes the decline in primary care doctors, to the point that in 2005, only 8% of medical school graduates were going into family practice. If the hospital model is dependent on patient flow coming from primary care physicians [or from specialists who themselves have been referred to by primary care physicians], then this shrinking of primary care doctors necessitates a rethinking of the hospital model and where and how the flow of patients can be generated. Flower's solution is that hospitals must increasingly take on the role of primary care providers and he suggests a number of ways to do this.

His solutions, however, seem to fall short of really addressing the issue of increasing the supply of primary care physicians. Companies like Sun Capital HealthCare, Inc. can provide the financial means and working capital hospitals need, but for the healthcare system to survive, the need to attract more primary care doctors into the system must be addressed. Financial incentives, medical school curriculums, geographical considerations, electronic records/remote capabilities, etc. all must be considered when looking at redefining the hospital model and reinvigorating a healthy healthcare system that is referral based. Let's bring back "housecalls" to the healthcare system.

Hospital Costs Vary While Quality is Indiscernable

The Herald Tribune article explains how to evaluate a hospital for its quality and cost of its services.

An appendix, the mysterious little organ in the abdomen, is much the same in everyone. So why would it cost, on average, $61,737 to remove it at one hospital, and $17,437 at another? The phenomenon goes beyond surgery, even to common ailments that virtually every hospital sees.

Hospitals base those charges on their internal costs -- the price for bandages, the salaries of nurses, and so on -- and on what they think their local market can support, said David Verinder, chief financial officer at Sarasota Memorial Hospital.

Hospital Shelves Plans to Build Teaching Hospital

Boca Raton Community Hospital has backed out of building a teaching hospital in partnership with 2 universities, as a result of financial problems.

This fiscal year, the hospital had $40 million in operating losses. Hospital officials say they are planning to sell an 80-acre property bought in anticipation of the project to recover a large chunk of the expenses incurred.

Boca Community Hospital is now taking aggressive steps to turn around their financial position. MAR funding is a tool used by hospitals with similiar fiscal difficulties as a way to accelerate cash flow, boost liquidity and get their finances back in shape.

By incorporating MAR funding to their financial turnaround strategy, Hospital officials will be in a better position to revisit the development of a teaching hospital.

Debt Default Rates On The Rise

The June 26th issue of ABF Journal contained an interesting article in which Turnaround Industry Professionals noted that they expect debt default rates to climb substantially. They predicted that debt default rates will rise above 10% in 2009 as the credit crunch continues to disrupt working capital for many healthcare companies.

In a recent Turnaround Management Association poll, about 70% of the respondents expected a surge of defaults in the next three years, with 2009 being especially large. Further, about 94% of the TMA poll respondents said credit is tighter this year and 80% stated that traditional lenders have become less active and are putting more restrictive covenants and conditions on the loans they do make.

Of course, this tightening on traditional loans is creating a working capital shortage for many healthcare businesses and is causing them to seek alternative sources of working capital. Many have discovered that Medical Accounts Receivable (MAR) Funding can be an excellent source of working capital without restrictive covenants/conditions and without putting incremental debt on the balance sheet.

Hospital CFO's Should Seek Nurses' Input

According to healthcare experts at the recent HFMA annual conference, nurses are a key part of a hospital's revenue cycle and their input should be sought after from hospital CFO's.

Nurse input is especially beneficial during the development of organizational business plans experts say. "You have to involve all parties in strategic financial planning," said Susan Sanders, associate vice president for patient services at QHR Consulting. "Sharing information between the nursing staff and finance can be a big improvement in the creation of annual budgets and business plans."

Nurses are also great resources for market research. They can be a great help in developing new product lines or offering new services as they often know vendors as well as clinical colleagues in other hospitals.

Hospital CFO's should be sure that nursing managers understand the impact of overall hospital profitability. They should be aware of the importance of a hospital's liquidity position.

The experts say that the nursing and finance departments need to work together on nurse retention as well.

Cut in reimbursements for medicare

With physician reimbursements set to drop 10 percent, doctors will begin evaluating whether to stay with Medicare.

Senate Republicans blocked action last week on Democratic-backed legislation that would have averted the fee cut by instead reducing payments to insurers that provide benefits through Medicare Advantage plans. Republicans said that the insurer cuts, which the House approved, were too deep and that the Bush administration had threatened to veto the measure. Congress is set to be in recess until July 7.