Category Archives: hospital finance

The great sucking sound: For-profit buyouts a drain on communities

Few have spent more time than I calling out non-profit hospitals on their inadequate charity care levels.  But when it comes down to

This picture shows a panorama of Boston (USA).

Boston, there's a new predator in town

it, I’d prefer a non-profit whose chain can be yanked over a for-profit with no public service requirements at all.

I was reminded of my concerns this week when I heard about the two hospitals Cerberus Capital Management agreed to acquire this week.  It’s picking the hospitals up from Essent Healthcare, another for-profit.  Cerberus, a New York-based private equity firm, just spent $900 million for the six-hospital non-profit chain Caritas Christi. That gave them a nice foothold in Boston, an incredibly competitive but opportunity-rich environment.

Really, both of deals the two-headed guardian of the afterlife has chosen seem to be good ones — for them.  While I’m not privy to much financial information on any of the eight hospitals, we do know that Caritas Christi was in big trouble financially.

I’d wager that the other two hospitals, which lie in the Boston suburbs, are in bad need of a capital infusion to prop them up during these bad times.  This situation allows the firm to swoop in, buy equipment, get things shipshape and get their money many times over.  Oh, and probably do a nice job of squeezing the health plans, now that they’re getting critical mass. Again, good for them.

The thing is, I strongly doubt that any private equity firm is going to have the interests of the community in mind.  One way or another, in most of the private equity buyouts I’ve followed, all of the extra money generated by improvements ends up in the bulging bank account of the PE guys.  They’re not in ANY investment for the long term; that’s just not what they do.  They’re there to pillage, however, legally, and get the hell out.

Far too often, PE players get into a deal, drag the hospitals down financially and then more or less shrug their shoulders when the facility plunges into the red.

The PE firm doesn’t give a rat’s patoot — they’ve made their money. The often-struggling community is left with, well, not a whole lot.

I’d argue that this is a travesty.  We need, as professionals and healthcare consumers, to keep hospitals as community asset with a strong bank account and a long-term view.

So, my question to you is this. Is it inevitable, during this period of transition to full-out reform, that community hospitals get decimated?


Bigger, better, faster hospitals are a great idea

Nagoya City University Hospital in Kawasumi

Image via Wikipedia

The other day, I read a tweet from the estimable Matthew Holt in which he summarized what hospitals have been telling him.  In short, they seem to want bigger, badder, newer facilities.  In fact, if I recall correctly, they feel they’re in deep mud if they don’t get these  upgrades and/or new facilities soon.

OK, usually I take such statements with a grain or two of salt. After all, who  — in any industry — doesn’t want the latest and greatest, from the toys we squabble over on up into adulthood?  But in this case, I think we should be taking Holt’s feedback quite seriously.

After all, despite the fact that I’m not an architect, hospital CEO, designer  or any variation on same, I can immediately think of a few very important reasons for a massive buildout of hospitals to improve care and meet today’s process standards:

*  Shared rooms are right out.  There are already a fair number of hospitals (no stats to hand but this IS happening) who are converting all shared rooms to single rooms within their facility.  Their main rationale is infection control, but I think they’re also hoping to streamline the care process by allowing nurses to think rationally, about one patient a time.

*  Older physical plants are a huge liability. When you’ve got a house full of sick people, the last thing you want is a drip from that 20 year old pipe, asbestos to remediate, mold in ancient ducts and so on.  While maintenance will be an issue for any facility, we’ve learned a lot since the first wave of current hospitals were built. Let’s get rid of ’em ASAP.

*  If you’ve ever owned a house from the 70s (and I have) you know that they leak air conditioning and heat out at a ferocious rate.  Sure, you can weatherstrip and insulate and hang curtains to seal out air from the windows, but eventually, it starts to cost so much that it’s a big waste.  A new place — or hospital — is much cheaper over the long run.

*  And while they’re at it, hospitals newly-designed hospitals can be planned with green energy usage in mind — a trick which might not work out in a clumsy plant from decades a ago.  That not only helps to save the earth, it can save big bucks too.  Again, I don’t have a case study handy but Google “green hospitals” and  you’ll find some heartening stories.

* Oh, and I almost forgot…old hospitals can be a nightmare for techs to work around.  Whether you’re talking about simply making sure Wi-Fi gets to every corner of the building or rolling out an EMR, nobody needs to live with design flaws from the 60s.

So, though I’m surprised to say it, it seems to me that bigger, better, faster hospitals are indeed what the doctor ordered.  We’re not talking self-glorifying projects approved by boards to prove they’ve got the juice to make it happen, we’re talking simply about getting with the times.   Let’s hope plenty of hospitals find the means to do so.

The death of the old healthcare magazine? A public challenge


What if healthcare coverage sizzled like this?

With all due respect to the talented people who work (and have worked) at Modern Healthcare magazine, I’m here to kick it in the butt, not praise it.

Now, I have to admit that there’s a reason nobody’s put MH to sleep yet; in short, it’s probably a very successful business.  If nothing else, as an industry figurehead,  it’s deeply entrenched with the “I’m so geriatric I’ve forgotten the names of my colleagues” set.

After all, any new ideas the aforementioned reporters cleverly slip into their stories are buried in an avalanche of dull corporate-speak, and sadly, there’s usually an audience for mind-numbing jargon. I think maybe the corporate-speak makes the pointy-haired bosses feel all important and meaningful.

But tell me, folks, have you ever read a Modern Healthcare story and said “wow!” or “hmmmm” or even “I’m mildly amused”?   Do you ever change your plans based on something you’ve read in this insipid journal of record?  Or do you skim the half-baked parts (again, baked by editors when all is said and done, so don’t blame my editorial colleagues) and just drop your copy of the darned thing?

I say it’s time for a new healthcare industry publication, one which goes FAR beyond this humble blog.  I want to see an industry magazine/Webzine/podcast/TV show/you name it which covers healthcare the way it is — as one of the most critical industries in the world with a hornet’s nest of issues to address.  I want to see color, life, snark, attitude, vigor, curiousity and most of all, passion.

I say we can build such a service for our industry.  In fact, I’m immodest enough to say that *I* and a team of stalwarts can build such a resource, one which would transform healthcare to some modest degree just by existing.  I’m talking Wired and Fast Company and Forbes and Modern Healthcare’s good bits mixed into the insider smarts of the New York Times Deal Book and Heard on the Street.  Yup, you heard me — we’re talking about a paradigm changer.    And if you’re wondering why this editor thinks she can pull such a big idea off I say, with apologies for the obviousness, “Why not?”

So, are you going to help me?  Do you want to have a voice in changing how healthcare looks at itself?  I know for sure I can’t do it alone, and I doubt anybody could.   I need money, yes — details on request — but as much as anything I need people to decide that our current way of covering healthcare just doesn’t cut it.

If you’re with me, let’s go for it.  Call 571-484-4056 or write to me at I’m ready to move if you are.

Would you feel safe in this ugly lobby?

A patient having his blood pressure taken by a...

Image via Wikipedia

Folks, I’ll never forget that night.  Led gently by my worried husband, who was a bit concerned about my ability to keep breathing, I walked into the lobby of a mid-sized, plain-vanilla 100-odd bed community hospital in my neighborhood.

I already knew, from phone calls to my PCP, that I probably had pneumonia. And I knew that while I probably didn’t need an admission, I definitely needed a hand.  My temp was 104, my cough was in the Black Plague range  and I could barely walk.

So, then medical reality collided with nice, warm, compassionate medical theory.  The details aren’t important — basically, since the ED staff had nowhere appropriate to put me while I waited, and demanded I wear a mask I simply could not tolerate  — I ended up sitting on the floor inside the glass box between the outside and inside doors to the facility.  At least the cold from the winter night kept my temp down a bit.

I’m sorry, but I absolutely cannot fathom why even a not-so-rich community hospital can’t do more to make very, very uncomfortable and scared people feel safe when they enter an ED door.

Why are hospitals spending SO much energy advertising their abbreviated ED wait times?  Customer service, right? Well, guys, I can assure you that it makes more sense to start with EDs that aren’t a nightmare to visit. Get people through quickly? Sure. But for the time they’re in the lobby, much less in case, make that time welcoming and safe.

Yes, I realize not every hospital will spend enough to put Pottery Barn-style couches and deluxe coffee and tea service out there, but what bothers me is that comfort doesn’t seem to be anyone’s aspiration when patients arrive.

The nursing staff in the emergency departments I’ve visited are largely abrupt and impatient, refusing to make the slightest human connection with patients.  The lobbies themselves stack uncomfortable institutional chairs and horrible lighting on top of one another in a graceless manner which rivals sitting in the New York City subway at 2AM.  And if you want food or drink you often have to go on a hunting expedition you’re in no position to conduct.

My take? This is not acceptable. No. Not for a second.  I don’t want to hear any excuses about it.

If your hospital can’t afford high-toned decor, maybe get a volunteer to serve as a concierge to help make people comfortable. Rent a goddamned cot or two for patients who aren’t dying but feel like they want to.  Provide some hot liquids, for Christ’s sake — it’s not going tap out the budget for a mid-sized community hospital.  Remind your front-desk nurses that people are in pain, and base part of their pay on the reports you get from patients.

You know, evidence is piling up that patient satisfaction correlates pretty strongly with profit.  If compassion and common sense aren’t enough to convince the hold outs that it’s time for them to make their front door inviting, I guess nothing will.

Time to demand charity program disclosures

Here’s a quick thought for the day:  What if the federal government made non-profit hospitals meet specific standards for publicizing their charity/free care programs?

As we all now, hospitals have to put their EMTALA notice front and center in the emergency department entry area.  I don’t know if the feds set a specific size for the notice, but in my experience as a patient, it’s usually a pretty big sign.

When it comes to charity care, on the other hand, there’s few if any standards for informing the public of their options. And far too often, hospitals don’t get the job done.

While some hospitals offer charity care notices on every bill they send out, post signs alerting patients to the option, tag every electronic transaction with a charity-care reminder — hell, they write it in the sky — others make rather perfunctory efforts.  Either they’re hiding something, or more likely, they just aren’t sure how to get the point across.

So, let’s make things simple. Let’s set a federal standard for displaying information on charity programs, something along the lines of EMTALA public display rules.
That way, financial managers won’t be forced to think like marketing communications types, and every hospital will be forced to follow the same rules.

Seems to me that would even the playing field; hospitals wouldn’t be rewarded for dodging their responsibilities, but instead, could compete on how well they performed.

So, why do I think this would be wildly unpopular? Am I right?

Healthcare M&A rapidly going global

Folks, a few days ago I posted a few thoughts about the growth in healthcare M&A activity — and told you that I saw activity picking up in Q4 of this year. Without saying so, or even thinking about it, I pretty much assumed that we were talking about outflows of U.S. capital into other regions.

That, I’m embarassed to say, was rather myopic of me.  In fact, until today, I was completely out of touch with the pace of healthcare investments across the world. And while India is perhaps the most visible example of a globally-expanding marketplace, it’s just the tip of the iceberg.

Just check out some of the recent transactions I found just be doing a little digging:

> Indian hospital chain Fortis Healthcare plans to buy a hefty chunk (23.9 percent) of Singapore’s Parkway Holdings.

> Hospital operator Life Healthcare Group completed South Africa’s biggest IPO last week, in a deal which raised about $680 million. The company, whichowns or operates 62 hospitals and about 8,100 beds total, is hunting for properties in Turkey, Ghana and india.

> Qatar First Investment Bank, along with private equity firm Ithmar, has begun picking up healthcare and pharma/life sciences investments in the region. The first deal undertaken by the two is an investment in Abu Dhabi-based Al Noor Medical Company.

Of course, some markets will be slower than others to pick up speed — after all, healthcare systems are often intertwined with government financing schemes and local politics — but the process of global consolidation is well on its way.

Investors prowl for hospital buy-out deals

It’s been an interesting few months for private investment in hospitals. Investors have developed an avid interest in hospital properties, though few deals have surfaced yet.  While ratings agencies don’t seem too impressed with hospitals’ profit potential, investors are betting that they’ll  do well under reform.

Consider the following deal, announced in March, in which a private equity firm will take a group of non-profit Catholic hospitals and turn them into for-profit institutions:

Caritas Christi Health Care, the state’s second-largest hospital group, is set to disclose today that it has agreed to be acquired by New York private equity firm Cerberus Capital Management in an $830 million deal that hospital officials say will allow the chain to shed debt and make major improvements. (The Boston Globe)

The buyout won’t go through until it’s approved by the state’s Attorney General, who has to decide whether the for-profit conversions are in the public interest. But our guess is that the deal will eventually get done, considering that Caritas is in dire financial trouble and needs money to invest in facilities and repairs. And Cerebus gets a deal which, as I see it, has considerable upside potential.

And then there’s this near miss, in which Tenet tried but failed to acquire Aussie hospital chain Healthscope:

Tenet Healthcare Corp.’s scuttled bid for Australia’s Healthscope Ltd. became a “no-win situation” after information about the proposal was leaked and investors became opposed, Chief Executive Officer Trevor Fetter told Business Week.  Dallas-based Tenet withdrew its nonbinding offer for Melbourne-based Healthscope, Australia’s second-largest hospital operator, on June 7 after investors criticized the deal.

While the deal has perplexed journalists covering the story, and analysts on the Street, I’m not puzzled. To my mind, Tenet is thinking long-term — to the era when global reach is critical to running a big healthcare business.

Admittedly, these are just a couple of snapshots draawn from a large and complex picture. But there’s many more deals lurking in the corridor. My guess is that the pace of hospital acquisitions is going to pick up dramatically by Q4 of this year.