Have debt will travel

Not-for-prof­its meet in N.Y., talk about changes

Modern Healthcare - - The Week In Healthcare - Melanie Evans

Health sys­tems face tighter mar­gins and more pres­sure to work closely with physi­cians as cov­er­age ex­pands and pay­ers grap­ple to con­tain costs un­der health re­form, said health­care ex­ec­u­tives in New York last week at a health­care fi­nance con­fer­ence.

Ex­ec­u­tives gath­ered at the Wal­dorf As­to­ria for the Non-Profit Health Care In­vestor Con­fer­ence said ex­pected changes to health­care de­liv­ery in the com­ing decade un­der this year’s health re­form laws have spurred in­vest­ment in technology, qual­ity and cost-con­trol ef­forts while leav­ing ex­ec­u­tives more cau­tious about cap­i­tal spend­ing. The two-day, yearly event lets bor­row­ers show­case their op­er­a­tions and strat­egy for in­vestors and credit an­a­lysts.

Spon­sored by the Amer­i­can Hos­pi­tal As­so­ci­a­tion, the Health­care Fi­nan­cial Man­age­ment As­so­ci­a­tion and un­der­writer Cit­i­group, the event has mush­roomed be­yond its ori­gins as health­care bor­row­ers’ chance to pitch their strengths to mu­nic­i­pal bond in­vestors. The con­fer­ence drew roughly 600 peo­ple, a record, in­clud­ing ex­ec­u­tives from 27 bor­row­ers who pitched their or­ga­ni­za­tions’ op­er­a­tions be­fore in­vestors. Those or­ga­ni­za­tions had about $37.8 bil­lion in out­stand­ing debt last year. But among the at­ten­dees were also health sys­tem ex­ec­u­tives ea­ger to hear how pre­sen­ters— in­clud­ing some of the largest health sys­tems with the strong­est fi­nances—are ready­ing for re­form.

“We’ve all been very care­ful about rais­ing new money,” said Todd LaPorte, chief fi­nan­cial of­fi­cer and se­nior vice pres­i­dent of Scotts­dale (Ariz.) Health­care. The sys­tem, which owns three Ari­zona hos­pi­tals, closed its books last Septem­ber with $10.5 mil­lion in in­come on rev­enue of $808.1 mil­lion, and was among the low­er­rated bor­row­ers to go be­fore in­vestors last week. Stan­dard & Poor’s rates Scotts­dale BBB+ while Moody’s In­vestors Ser­vices and Fitch Rat­ings list the sys­tem A3 and A-, re­spec­tively.

LaPorte said health re­form has ac­cel­er­ated cap­i­tal in­vest­ment in clin­i­cal in­te­gra­tion and in­for­ma­tion technology. Hos­pi­tal ex­ec­u­tives, faced with the prospect that re­form laws re­place in­cen­tives for high-vol­ume hos­pi­tal care with those that re­ward ef­fi­ciency and care in the out­pa­tient set­ting, are less cer­tain about cap­i­tal projects to ex­pand hos­pi­tal bed ca­pac­ity, he said.

The sec­tor also an­tic­i­pates de­clin­ing mar­gins as fed­er­ally sub­si­dized in­surance squeezes hos­pi­tal re­im­burse­ment by $155 bil­lion in the com­ing decade, said LaPorte and other ex­ec­u­tives at the con­fer­ence. Scotts­dale ex­ec­u­tives’ project the sys­tem will see $40 mil­lion less in rev­enue dur­ing the next 10 years, de­spite ex­panded in­surance cov­er­age, as health re­form pro­vi­sions take ef­fect.

Scotts­dale used Medi­care rates to

LaPorte: “We’ve all been very care­ful about rais­ing new money.”

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