HFMA ANI Conference in Las Vegas June 22 - 27th

The Healthcare Financial Management Association (HFMA) held its Annual National Institute/Conference in Las Vegas, NV from June 22nd through June 27th. As always, the focus of the event was to provide educational opportunities for healthcare financial professionals to help them understand the ever-changing financial environment they deal with on a day-to-day basis.

This year, there was much discussion regarding the financial difficulties many healthcare providers are dealing with due to the decrease in liquidity. While still faced with increasing costs and decreasing payments, it is not unusual for healthcare providers to be operating with a negative net income. The lack of liquidity only compounds the problem by making it more difficult and expensive to obtain traditional financing such as loans. Therefore, there was strong interest among healthcare providers to discuss alternative sources of financing such as Accounts Receivable Financing.

As an exhibitor at the HFMA ANI, Sun Capital HealthCare, Inc. had the opportunity to discuss its Medical Accounts Receivable (MAR) Funding solution with a large number of attendees at the conference. It was a surprise to many attendees that they can obtain this alternative source of financing without adding debt to their balance sheet. Many attendees commented this could be an important source of financing during this period of low liquidity.

More and More U.S. Hospitals Filing for Chapter 11

Recent studies have shown that more than 2,000 hospitals in the U.S. are not generating enough money to fund operations. A large portion of these hospitals are being forced to file for Chapter 11 under the Bankruptcy Code.

Sun Capital HealthCare (SCH) offers hospitals in similar situations a debt-free funding solution. Several years ago, in the wake of the NCFE collapse, SCH aided several healthcare companies regain their footing by creating a post petition funding plan which allowed them to continue operations, pay employees, and fulfill other pre-petition vendor obligations.

SCH's MAR Funding solution can help turnaround the capital structure of a healthcare company in danger or act as an ally for healthcare companies ready for growth.

AMA's Cure for Claims Campaign

AMA Aims to Cure What Ails Claims Process:

AMA has begun the Cure for Claims campaign. An AMA board member William A. Dolan, M.D, said their goal in this campaign is to hold health insurance companies accountable for making claims processing more cost-effective and transparent, and to educate physicians so they are no longer at the mercy of a payment system that detracts from patient care.

In conjunction with this campaign the association has published its first report card on the insurance companies. The report card provides an in-depth look at the claims processing performance of Medicare and seven national commercial health insurers.

Electronic Medical Records

In the June 24, 2008 issue of The New York Times, the editorial "Our Pen-and-Paper Doctors" bemoans the snails pace at which American doctors are converting to modern technologies, especially when compared to physicians from other countries. It goes on to say that without this conversion, the benefits of healthcare reform will become irrelevant.

Money, not enough of it, of course, is always to blame. But inertia is also at work here. For this country to improve the delivery of healthcare and reduce the financial burden of paying for it, not only must the institutional barriers that currently exist be broken down, but the healthcare paradigm must change to one of preventive care rather than curative care. Today, with the costs of drugs and technology so high, it often seems that profits drives the healthcare system. Since so much of healthcare is now in the hands of corporate structures [providers, suppliers, drug companies and insurers], whose only responsibility is to deliver quarterly profits to shareholders, the health of the nation is at risk. Yes, we can develop the greatest drugs and the most advanced research tools and technologies. But to really make a difference in the health of the nation, we must get back to the basics and change bad habits and live healthier lifestyles.

Institutional change is always hard. But until our country makes the committment to change the way we do things, which will require sacrifices from all of us, things will not improve. There are too many vested interests in staying the course.

Sun Capital Group Exhibited at 24th Annual AIRA Conference

Earlier this month, Sun Capital Group (SCG) attended and exhibited at the AIRA (Association of Insolvency and Restructuring Advisors) bankruptcy and restructuring conference.

The event had a successful turn-out including financial advisors, attorneys, business turnaround consultants, accountants, crisis managers and many other individuals in the business turnaround, restructuring and bankruptcy practice areas.

According to Jim Beutel, SVP of Sales and Business Development of SCG, interest was high for SCG's customized working capital strategies. "Many of the attendees had clients currently in dire situations, either in the midst of bankruptcy proceedings and/or a restructuring transition, or with these challenges closely looming," said Beutel.

Beutel spoke with AIRA professionals about how SCG's debt-free accounts receivable funding program has successfully supported many businesses in turnaround mode.

Wall St. vs. Main St. - Healthcare Financing

An article by Matthew Weinstock in the June 20th issue of H&HN online makes some interesting observations about the intersection of Wall St. with Main St. in setting the future direction for healthcare. Wall St. is looking for returns on the bonds they've bought while Main St. [the public] is looking for increased access to quality healthcare.

A common thread tying the two objectives together is investing in information technology. As has been discussed here before, IT investments, whether it's electronic medical records, remote links to specialists, improved operating systems and controls, etc. are seen as providing the tools needed to develop metrics and other measurement approaches for evaluating the quality of healthcare delivered by providers.

However, there is a growing gap between the elite not-for-profit health care systems with their smaller and/or rural counterparts. What worries Beth Ward, CFO for the Moses Cone Health Systems in N.C. "is an ever-widening gap with hospitals that have trouble surviving market downturns. She noted that some hospitals in North Carolina with lower credit ratings have put much of their capital plans on hold." The natural consequence of doing this will only make it harder for these hospitals to compete in the future as their ability to adapt to new market conditions, generate new revenue streams and/or develop and implement a new business model for how they operate in their market.

What the elite hospital systems rely on to support their growth and expansion is "... strong balance sheets to fund expensive information technology projects with the hope of improving patient safety and quality of care". One way for the not so succesful hospitals to improve their balance sheets is to add a MAR [medical accounts receivable] funding program from Sun Capital HealthCare Inc. to their financial toolbox.

Physician Reimbursements Flawed

The American Medical Association said recently that insurance companies often fail to properly reimburse doctors, needlessly adding more than $200 billion a year to the nation's healthcare tab.

In a six-month period beginning in October an analysis found that doctors in the U.S. spend 14% of the fees they receive from insurers and Medicare on the process of collecting those fees, in a report issued at an AMA annual meeting in Chicago.

The analysis sized up insurers and Medicare on how often they paid on time, how often they denied claims and how often they paid at the contracted rate and other measures.

Medicare outperformed commercial insurers in many areas, and some insurers paid physicians' bills better than others!

How To Expand Your DME/HME Business Without Incurring Debt

Expanding a business invariably requires cash infusion. Traditionally, we think of two ways to do so: borrowing money (debt) and selling stock (equity). While both are viable methods, they're not the only, nor necessarily the best, option for a DME/HME provider's growth. A third tool is medical accounts receivable funding, which uses your non-performing asset, your receivables, and turns it into readily available cash.

Borrowing Money is easily understoond and offered by a wide variety of lending institutions. However, any DME/HME owner who has gone to a bank has experienced the limitations of debt financing. Small businesses are often disqualified and personal guarantees are usually required. Most credit lines are limited and insufficient due to the bank's "under-valued" valuation of assets. Consequently, your credit line can easily "max out" and you will be right back where you started. Finally, there are other fees along with the interest rate that increase the "real" cost of borrowed money.

Selling Stock has the advantage of no interest payments and you have not increased your borrowing. However, by selling stock, you often relinquish significant ownership. Your investors may not understand your business and often seek to exercise control that limits your decision making. Finally, they take a significant share of your profits, which becomes costly over the long run.

Medical Accounts Receivable Funding (MAR Funding) utilizes an asset, your accounts receivables, to generate cash flow without borrowing money or selling stock. Every DME/HME provider can "cash in" their medical claims that are awaiting payment, for immediate use to fund your expansion. The advantages of MAR Funding include no funding caps and availability grows as you expand your business, without going through yet another application process. And, there are no costs incurred when not in use. However, MAR Funding can only be utilized through a very specialized funding company, such as Sun Capital HealthCare, Inc.

DME/HME providers should evaluate all these financial tools when selecting a strategy for expanding their business.

Sun Capital HealthCare Exhibits At ANI: The Healthcare Finance Conference

Over 5,000 healthcare financial professionals will gather in Las Vegas next week for the ANI: The Healthcare Finance Conference where Sun Capital HealthCare, Inc. (SCH) will be an exhibitor.

The annual conference is the Healthcare Financial Management Association's (HFMA) premier educational and networking event which provides members with ideas and tools to help their organization achieve outstanding financial and operational results.

SCH will be on hand at Booth 313 to discuss Medical Accounts Receivable (MAR) Funding with attendees. SCH's customized MAR Funding program is a debt-free solution for healthcare providers/suppliers whether they are in fiscal trouble or growth mode.

All attendees are encouraged to stop by Booth 313 and meet with Jim Beutel, SVP of Sales and Business Development for SCH, and/or Fred Leder, VP of Business Development, to speak one-on-one about the benefits of incorporating MAR Funding in their financial strategies.

For DME/HME Providers, Inventory Is A Matter of Survival

To a DME/HME provider, inventory is a matter of survival! Your biggest concern is delivering the last unit in inventory and not having the cash to replace it. If a customer calls seeking that item, you could lose the account because you can't deliver. If it's a new prospect calling, you'll lose them to a competitor. Further exacerbating the problem, you may only be days away from your Medicare or insurance payment. This theme is quite common to DME/HME providers'. If you disappoint a client or prospect and cannot deliver, you've no doubt lost them.

You can avoid this scenario by having adequate start-up capitalization to meet your business plan's forecasted demand through loans, lines of credit, or equity partners. However, when you outgrow your initial capitalization, arranging financing to meet current demand can be time consuming and limited by the terms of your capitalization. And you need to be able to forecast demand pretty accurately. A solution to this dilemma is to accelerate your cash flow to keep it current with your inventory needs.

A DME/HME provider has a powerful funding tool to do so. Medical Accounts Receivable (MAR) funding enables you to utilize a non-performing asset, your receivables, to generate debt-free readily available cash. With this funding tool, the flow of your daily invoicing can generate a flow of daily cash and your funding availability grows as your accounts receivable grow. MAR funding is the most efficient form of cash flow enhancement in the financial marketplace. Loans and lines of credit are important tools for a successful financial strategy, but when adequate cash flow is critical to managing your inventory, Medical Accounts Receivable (MAR) Funding should be evaluated.

Capital Markets: Impact on Healthcare Providers

In the June 11, 2008 issue of H&HN Magazine, Lee Ann Runy's article on "Presenting Your Story to the Capital Markets" has some very interesting insights for hospital executives facing the turmoil of the capital markets and their impact on healthcare providers. In the article she cites Fred Hessler, managing director at Citi, as follows:

With capital harder to come by, hospitals need to return to the basics, says Fred Hessler,managing director at Citi, focusing once again on what has always been important to the capital markets: robust cash flow and a strong balance sheet. “The future earnings potential of hospitals will be challenged. Strong cash flow and balance sheets can absorb the shock to earnings potential,” he says.

As is pointed out, these two criteria have always been important, not only to the capital markets, but also to the success of the hospital itself. The difference today is that because access to debt has been severely tightened, those hospitals who have not paid sufficient attention to their financial strategies and put together effective financial planning to implement their growth or survival strategies are becoming more and more financially hard pressed.

Debt-free funding that accelerates a hospital's cash flow can provide working capital to meet the financial needs of the hospital while at the same time, by making their balance sheet healthier, they can protect their credit ratings. Sun Capital HealthCare's MAR [medical accounts receivable] funding programs exclusively for the healthcare industry is a proven successful financial tool that more and more healthcare executives are adding to their financial toolbox. Because of its flexibility, it can effectively be used in conjunction with a capital and/or debt strategy to fund the financial needs of hospitals.

Quake Safety Costs Affect California Hospitals

Hospitals across Southern California are pouring millions of dollars into structural improvements to satisfy a strict new state law mandating seismic upgrades, but it's still uncertain whether hospital officials will meet a looming deadline - and how they'll pay for it.

"Hospitals are really up against the gun," said Jim Lott, executive director of the Hospital Association of Southern California, an industry trade group. "Here in Southern California, we have a much higher concentration of hospitals at risk (for earthquake damage) and with about 40 percent of hospitals already operating in the red, you can see how serious this is."

Hospitals in the South Bay already have spent millions of dollars on studies and construction plans. Officials have until the end of this year to submit a report to the state detailing how they plan to meet the seismic requirements by the 2013 deadline.

Ten hospitals have closed in part or completely over the last decade, leaving gaping holes in the Los Angeles County's health care network. Officials at many of the struggling hospitals cited the impending seismic upgrades as reasons for their closure.

Hospital executives throughout the South Bay say they are hoping to avoid additional debt in paying for these upgrades.

Many of these hospitals would benefit from adding Medical Accounts Receivable (MAR) funding to their financial strategies in order to pay for these mandatory upgrades. MAR funding is a proven debt-free method of generating working capital. Sun Capital HealthCare (SCH) transforms a hospital's accounts receivable into a cash flow solution by purchasing the hospital's third party claims and advancing them cash within 24-48 hours of submission to SCH.

This funding solution can be used as a tool to fuel growth and profitability.

ELECTRONIC RECORDS

Electronic record keeping is much in the news in the healthcare industry, as is the issue of measuring healthcare "quality" and the two seem to intersect. There is little disagreement that moving in this direction is good for the health of the nation. By having electronic records, it is thought that effective metrics can be developed that can allow healthcare consumers to evaluate alternative services, hospitals, etc. By having electronic records, the ability to diagnose and treat patients from remote locations is enhanced, which can mean providing better healthcare to rural cities and locations which may not have the local availability of a wide spectrum of healthcare services, specialists. etc. And by going digital, perhaps we can cut down on the errors caused by illegible prescripitions issued by doctors.

The question is how and who is going to pay for this. The big hospitals with access to multiple sources of capital will have a much easier time in finding the funding resources for implementing government as well as non government mandated electronic records. But with so many smaller and rural hospitals struggling fiscally, the additional capital burden of upgrading their existing technology could become onerous.

Coupling this scenario with the liquidity crunch and tightening of credit by the traditional lending sources, the use of MAR [medical accounts receivable] funding as an additional tool in the financial arsenal of healthcare executives is becoming increasingly important. More and more are turning to funding sources such as Sun Capital HealthCare Inc. to solve their cash flow problems. Debt-free, virtually immediate availability of funds, no funding caps and unrestricted use of funds are just some of the reasons that healthcare providers and suppliers are taking advantage of this financial tool. They are discovering that it is not just for organizations in financial trouble but that it is an effective tool for funding growth and expansion as well.

If your healthcare organization is facing the question as to how to fund the requirements of implementing and/or upgrading an electronic medical records capability, MAR funding could well be a solution.

Medicare Fraud Prevention

Medicare fraud costs the government millions of dollars! Losses create higher premiums, deductibles, and co-payments. They can also prevent Medicare from offering more services and better coverage.

Medicare fraud can be found in many types of billings. For example:
- Medicare Part A (nursing homes, residential facilities, hospitals and hospices)
- Medicare Part B (physician services)
- Medicare Part C (medicare advantage or Part D prescription drug benefit)
- Durable Medical Equipment suppliers

Preventive measures can be performed by:
- Thoroughly reviewing the explanation of Medicare Benefits or Medicare Summary Notice
- Protecting your Medicare card number
- Asking questions
- Reporting suspected fraud or abuse