MHA's Executive Briefing

Sarbanes-Oxley Upheld By Court as Constitutional

On Aug. 22, an appeals court upheld the Sarbanes-Oxley Act of 2002, dismissing arguments that the government's attempt to protect investors from repeats of the scandals at Enron and WorldCom gave federal overseers unchecked power.

For the full story from The Washington Post, click here.

Not-for-profit hospitals financially stable in '07, says Moody's

Despite the subprime mortgage-fueled financial markets meltdown, ongoing problems in the U.S. economy and ongoing pressure on margins, things weren't too bad for not-for-profit hospitals in 2007 according to financial industry ratings firm Moody's Investors Service. After reviewing audited fiscal 2007 financial statements for 410 non-profits, the firm concluded that operating performance and liquidity remained stable for non-profits last year.

A total of 77 percent of Moody's rated not-for-profit hospitals and health systems reported operating profits, too. This is a bit of a turnaround from a report issued by Moody's just a few months ago that, was rather pessimistic even about non-profits' near-term health.

Fiscal '07 was the second consecutive year in which median expense growth rate exceeded median revenue growth rate. Worse, median expenses exceeded revenues despite the fact that expenses fell to 7.4 percent for fiscal '07, down from 7.8 percent in fiscal '06. Meanwhile, margins softened, though they were still decent compared with historical levels, Moody's noted.

Median operating margins hit 2.1 percent in 2007, down from 2.3 percent in 2006. Median operating cash flow dropped too, to 9 percent from 9.2 percent. Despite these pressures, median capital spending ratios - additions to capital equipment and other properties divided by depreciation - climbed to 1.52 times, up from 1.45 times the previous year.

[ via Fierce Healthcare ]

President signs bill aiding tax-exempt bonds

President Bush signed on July 30 American Hospital Association-supported legislation allowing Federal Home Loan Banks to issue letters of credit on hospital and other tax-exempt bonds. The provision was included in the Housing and Economic Recovery Act (H.R. 3221) to help communities raise funds for health care facilities and other infrastructure improvements. It is effective immediately and sunsets on Dec. 31, 2010.

[ via AHA News Now ]

Avoiding Assumptions about Revenue Cycle Performance

An analysis of five-year hospital trends has shown a steady decline in accounts receivable (AR) days, the number of days it takes for an organization to collect payments. As recently reported in Healthcare Financial Management magazine, these trends are consistent across critical access hospitals as well as long- and short-term acute care facilities.

For the full story from Paul Kohlheim in H&HN, click here.

Study: Negative patient-care margins threaten hospital solvency

A large and growing number of hospitals are at risk for insolvency if their sources of non-patient funding falter, according to a new study by the Alvarez & Marsal Healthcare Industry Group. At least 2,044 U.S. short-term acute-care hospitals had a patient-care margin that averaged less than 0% for 2005 and 2006, the study found.

These hospitals “must rely on non-patient care sources of funding to remain viable,” the authors said. “This is a financially risky business model since non-operating sources of hospital funding are more sensitive to general economic cycles.” The study estimates there are “scores of hospitals that are slowly asphyxiating and slipping into insolvency as they divert capital dollars to fund operations.”

[ via AHA News Now ]

AHA Solutions to host talk on bond-market crisis

AHA Solutions will host a free audioconference April 2 on “The Turbulent Credit Market and What it Means for Your Hospital.” Kenneth Kaufman, managing partner for financial consultant Kaufman, Hall & Associates, and Mike Rock, AHA senior associate director for federal relations, will review the capital market crisis and its effect on tax-exempt bond issuers, debt restructuring and refinancing options for health care organizations, and lessons learned about weathering the current and future market.

The hour-long event starts at 1 p.m. Eastern time and is open to hospital personnel, who can register online to participate. AHA Solutions is an American Hospital Association subsidiary.

Study: Healthcare execs rely on acquisitions

A new study suggests that M&A activity plays a key role in the business strategies of many providers, according to Fierce Healthcare. The study surveyed 529 senior-level finance decisions makers, including 33 from the healthcare industry.

Among those executives, 46 percent said that their companies felt acquisitions played some role, and 9 percent a major role, in the way they ran their business. For nearly half, building market share was the biggest reason for doing the deal. Interestingly, given the turmoil in the financial markets today, 73 percent said that recent changes in market capital wouldn't affect their M&A strategy.

To get more data from the study, read this Healthcare Finance News article.

AHA applauds bill to support tax-exempt bonds

The American Hospital Association on Feb. 25 applauded legislation (H.R. 2091) that would allow bonds guaranteed by the Federal Home Loan Banks to be treated as tax-exempt bonds.

“Tax-exempt hospitals need every tool available to reduce their capital costs in light of their increasing needs for necessary construction and modernization,” AHA wrote to Rep. Sander Levin, the bill’s sponsor. “As hospitals lower their capital costs, the cost to the government health care programs is also reduced. Your legislation would provide hospitals with an important tool for lowering capital costs and enhance their ability to meet the construction and modernization needs of the future.”

Ways and Means urged to advance bill on tax-exempt bonds

Members of the House Financial Services Committee are asking colleagues to sign a letter urging the Ways and Means Committee to advance legislation that would give hospitals and other tax-exempt organizations new ways to guarantee tax-exempt bonds, according to AHA News Now. The American Hospital Association-backed legislation (H.R. 2091/S. 1963) would allow federal home loan banks to guarantee tax-exempt bonds.

Recent financial problems in the bond insurance market have made it harder to insure the bonds, resulting in higher interest rates for issuers. Capital Markets Subcommittee Chairman Paul Kanjorski (D-PA) and Ranking Member Deborah Pryce (R-OH) plan to collect signatures on the letter through Feb. 27.

In addition to AHA, supporters of the bill include the National Association of Counties, National League of Cities, U.S. Conference of Mayors, Mortgage Bankers Association and Independent Community Bankers Association.

Health care collections cause swelling of bills

The biggest problem facing the health care industry isn't the quality or availability of treatment, J.R. Thomas says. The real danger to our national medical system is the soaring cost of getting the bills collected.

The chief executive of Irving, Texas-based MedSynergies Inc. sees this firsthand in handling the back office operations for more than 2,300 health care providers in 26 states. Each year, more than $350 billion is spent needlessly as bills bounce among patients, doctors and insurers, says Mr. Thomas, citing a comprehensive study by McKinsey & Co. last year.

"Industrywide, the cost of collection is 20 percent of the medical benefits provided," says Mr. Thomas. "What business do you know of that has a 20 percent cost of collection and survives? None."

Read the full article from the Dallas Morning News.