11 October 2012

California Edition
Calendar
October 11-12
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Dignity Health Facing Challenges

Performance Plummets; Fitch Issues Downgrade
Dignity Health has experienced signicant nancial duress over the past year and will likely have some hard choices ahead as it moves forward with a non-hospital expansion outside of the western United States. The San Francisco-based Dignity, which earlier this year changed its name from Catholic Healthcare West, reported earlier this month dramatic drops in its scal 2012 nancial performance. Both its operational margins and investment returns took signicant hits. Dignitys net income for the scal year ending June 30 was $132.5 million a drop of nearly 85 percent from scal 2011s $950.5 million. Operating income was down signicantly, to $59.1 million from $242.7 million in the prior year. Overall revenues were at, at $10.5 billion, compared to $10.3 billion in scal 2011. Dignity ofcials blamed the downturn on lower patient volumes and underpayments from Medi-Cal and Medicare. Investment earnings took a bigger hit than operating income: They totaled just $73.4 million, down from $717.9 million in the prior year, a drop of 90%. During Dignitys scal year, the Dow Jones Industrial Average and NASDAQ were up about 3 percent. Dignity operates 39 hospitals in California, Arizona and Nevada, although the vast majority of them 32 are in the Golden State. In recent month it has made some signicant acquisitions outside of the hospital market. Its purchase in August of HealthWorks, which operates occupational health clinics in 16 states, comes on top of recent investments in ambulatory surgical centers and imaging centers with other corporate partners. We are growing to work more closely with doctors, insurers, employers, and individuals to transform our health system and deliver higher quality, more efcient care, said Dignity Health Chief Executive Ofcer Lloyd Dean. However, Dignitys lackluster nancial performance has drawn the attention of Fitch Ratings, which earlier this month downgraded

October 15-17
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October 15-17
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Continued on Next Page

WEBINAR

Thursday, October 25, 2012

10 A.M., PDT

MEDI-CAL EXPANSION: 2014 AND BEYOND

E-Mail info@payersandproviders.com with the details of your event, or call (877) 248-2360, ext. 3. It will be published in the Calendar section, space permitting.
Please join Lucien Wulsin, Executive Director of the Insure the Uninsured Project, and Elizabeth Benson Forer, CEO of the Venice Family Clinic, to discuss the challenges of Medi-Cal expansion under the ACA.

http://www.healthwebsummit.com/pp102512.htm a HealthcareWebSummit Event co-sponsored by PAYERS & PROVIDERS

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Top Placement... Bottomless Potential

NEWS
Dignity (Continued from Page One)
the ratings on Dignitys $3.5 billion in debt from A+ to A. According to Fitch. Dignitys nancial performance has been compressed since scal 2009. Overall nancial metrics lag'A'

Page 2

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category medians and are not expected to improve materially over the near term, Fitch said in a statement. It noted that Dignity also will assume more risk as part of its overall plans in growing its operations.

In Brief
CPCA Launches Patient Home Initiative
The California Primary Care Association has teamed with a variety of private companies and the NCQA in order to launch an initiative that will focus on the creation of patient-centered medical homes statewide. According to CPCA Chief Executive Officer Carmela Castellano-Garcia, the intent is receive NCQA designation for all 900 of its members, most of which are community clinics. The initiative builds on the team-based approach to care that health centers have used as their model for many years and leverages their existing strengths to build a sustainable standard for health home activities and services, Castellano-Garcia said. She added that a year-long pilot program moved about 150 clinics closer to NCQA designation as a patient-centered medical home. The initiative includes technical support offered to the clinics, primarily in the form of an online, cloud-based portal that can guide clinics through the NCQA application process. The portal was created by Arcadia Solutions, which is working with Azara Healthcare to assist the CPCA in the initiative.

Premium Increases Are Moderating

Both Aon, Segal Project Relatively Calm 2013
Two new surveys by national healthcare benet companies concluded that premium increases are at their most moderate levels in years, but they have differing conclusions about trends for 2013 and beyond. Although the surveys conducted by the New York-based Segal Co. and Illinois-based Aon Hewitt both agree that health plan premiums will see mid to high single-digit increases in 2013, there was some variance in how their data was interpreted. Segals data forecasts that health plan premiums will increase an unweighted average 8.7% in 2013, with increases ranging from 7.9% for health maintenance organizations to 10% for fee-for-service indemnity plans. Preferred provider organizations, one of the most popular plans, forecast an 8.3% increase. According to Aon Hewitt, premiums are forecast to increase 6.3% in 2013. That is up from the 4.9% increase reported in 2012, but signicantly lower than Segals numbers. The average healthcare cost per employee was $10,522 per employee in 2012, up from $10,034 in 2011. Both Aon Hewitt and Segal ofcials attributed a combination of the economic climate, extremely conservative budgeting for healthcare expenditures and cost-shifting for the relatively low premium increases. As actual results materialized, employers have seen some stabilization in employment levels, less severe impact of high cost claims, a general movement towards consumer-driven plans and greater clarity around the average cost impact associated with healthcare reform, said Tim Nimmer, Aon Hewitts chief healthcare actuary. As a result, 2012 premiums were offset to reect the better than expected historical experience. Segal mostly concurred with Aon Hewitts ndings. According to its survey, 86% of its respondents said that implementing Affordable Care Act requirements in 2012 primarily mandatory preventative care coverage had a cost impact of 2% or less. And while Segal projected 2013 increases that are higher than Aon Hewitts, company ofcials believe it is part of a trend toward cost deceleration. It projects that premium increases for most health plans will be about one percentage point lower than what was experienced in 2012. However, Segal was unable to afx precise drivers. While medical and prescription drug trends are projected to decelerate in 2013, we dont know if deceleration is a long-term trend or a temporary result of current economic forces, said Edward Kaplan, a Segal senior vice president and head of its healthcare practice. We question whether medical care that is being delayed or avoided could lead to higher rates of undetected or untreated conditions in the future.

Care Harbor Treats About 4,000 Patients

Care Harbor, a not-for-prot organization that provides healthcare services to uninsured and lowincome patients in large groups, treated nearly 4,000 patients during

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Continued on Page 3

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NEWS

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Kaisers Halvorson Will Retire In 2013

Has Led Organization For More than a Decade
George Halvorson, the longtime chief of the best-branded healthcare organizations executive ofcer of Oakland-based Kaiser in the nation. Permanente, announced he will retire at the Besides being one of the most visible end of next year. advocates of healthier lifestyles for Americans, Although known as a blunt talker, Halvorsons signature achievement will likely Halvorson slipped his retirement be the launching of a comprehensive and announcement into the sixth paragraph of a integrated electronic medical records system, letter to employees sent out last week. which ofcials say helped it make dramatic When I joined (Kaiser), I told the board quality gains and boosted patient satisfaction that I would commit to over the past decade. Kaiser completed the serving one decade, and I said they could rollout of KP HealthConnect in early 2010. count on me for that time frame. I picked a Halvorson has been quite proud and decade, in part, because protective of Kaisers I thought it would take system. In a presentation he about that long to make delivered to a national the kinds of conference of healthcare contributions that I nance executives last June, wanted to make, he openly griped about Halvorson said in the ICD-10 the voluminous letter. I also picked a expansion of medical codes decade because I was set to launch later in this 55 years old at the time decade. and I had long planned "I hate ICD-10. It drives to retire at age 65. me crazy, Halvorson said in Halvorson spent a question-and-answer nearly two decades as session after this speech, CEO of HealthPartners, which focused on the Minneapolis-based encouraging healthier health plan, before lifestyles. The primary reason assuming leadership of for his dislike of ICD-10 is his George Halvorson Kaiser in 2002. He has been a bit belief it was designed with a paperof an iconoclast within his own based system in mind, suggesting that organization. Whereas most of Kaisers senior it could prove difcult for Kaiser to make the management are physicians or hold Ivy transition without having to undertake major League degrees, Halvorson earned a changes to KP HealthConnect. bachelors degree and MBA from two No successor to Halvorson has been relatively obscure colleges in Minnesota. named. He announced his departure with 15 Nevertheless, he took an organization often months notice in order to ensure a smooth derided as a second-rate to other hospitals and transition. medical groups in California during the 1970s Kaiser Permanente has been a great and 1980s and catapulted it to the top ranks of place to work for me, said Halvorson, who providers. Kaiser routinely scores high in noted he would focus on initiatives to promote quality surveys from organizations as the workplace diversity after he left the diverse as the NCQA and Consumer Reports. organization. I have very much enjoyed the Kaisers Thrive campaign also makes it one last decade.
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In Brief
its most recent event in Los Angeles late last month. The free clinic, which was conducted at the Los Angeles Sports Arena just south of downtown L.A., provided basic healthcare services such as pap smears and mammograms, as well as dental and vision care. More than 4,300 clinicians and allied healthcare professionals volunteered their time. Putting together a free clinic of this magnitude is no simple task, but this is a prime example of what's possible when the public and private communities come together to serve those in need, said Care Harbor President Don Manelli. The recent Care Harbor session was conducted in collaboration with L.A. Care Health Plan, the Medi-Cal managed care insurer, as well as hospital operator Dignity Health, the California Endowment and Los Angeles County Supervisor Mark Ridley-Thomas, whose district includes the downtown L.A. area.

Childrens Hospital Receives HHS Medal

Childrens Hospital of Los Angeles received the Silver Medal of Honor award from the U.S. Department of Health and Human Services in recognition of its organ and tissue donor programs. The medal is awarded to any donor program that has a donor conversion rate of 75% or greater among living donors and 10% after a patients death. Organ donation is the one positive thing that can come out of tragedy the donor is giving another family and another child a second chance at life, said Nancy Blake, CHLAs director of critical care services and liaison to OneLegacy, the organ procurement agency Los Angeles area. Altogether, the HHS 22 hospitals in L.A. for their organ donation programs, and 13 received silver medals.

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OPINION

Page 4

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When Is Healthcare A CellPhone?

Takes on Delivery, Economics Not Always Applicable
Paul Hsieh, M.D. is a practicing diagnostic goods and services they can afford. Largely radiologist in Colorado and co-founder of this does not happen with healthcare. Patients Freedom and Individual Rights in Medicine. do not chose the cheaper and less effective He hates both government involvement in antibiotic to treat a serious bacterial infection. healthcare as well as the idea that funding Patients who are uninsured simply put off restrictions and not the free market would be seeking out any type of medical services until used to control costs. they cannot survive without them. In a recent Op-Ed article for Forbes, Dr. One cannot simply claim that free market Hsieh argued against rationing in Medicare principles should work for healthcare in the and Medicaid in favor of the free same way they work for cell phones. Unlike market.Rationing is inevitable whenever the almost all consumer products the vast number government controls medical spending. He of health care goods and services are paid for who pays the piper calls the tune. Under by a third party either the government or ObamaCare, government control of health private insurance through an employer. Both spending will quickly expand to affect most patients, as well as medical providers, are Americans, not only the elderly, he unaware of the actual costs associated with wrote. Note that we dont debate health care. This lack of cost how to ration cell phones. Thats transparency is antithetical to the very By because our relatively free market Chris Rangel, principles of a free market. Its like has driven cell phone prices so low claiming that democracy can exist M.D. that even many of the poorest without direct representation. Americans can afford one. Additionally, Dr. Hsieh said Of course a coronary artery bypass graft patients who have the costs of their basic is not the same as a cellphone and neither is medical needs covered will often pay out-ofan apple the same thing as an orange. pocket for extraneous and often unnecessary Healthcare is a huge and complex industry medical services. Patients with government with a vast array of both services and health insurance often pay cash for things like products. Cellphones and cellular services are Botox injections and other medically relatively straightforward consumer products unnecessary services. To say that the free that are easily subject to such free market market works in these circumstances and can principles as standardization, mass be applied to the rest of the healthcare production, and economies of scale in order industry is a ruse. There is no evidence that to control costs. patients utilize free market principles when Other than food and water, almost all faced with a severe or emergent health consumer products and services are not condition or the recommendations of their dictated by biological need. Healthcare is no physicians enough to lower overall costs among them. At some point in their lives through competition while remaining within a almost everyone will seek out relief from third party payer system. As such, it is not physical pain and suffering. Despite what logical do expect that the economic behavior most teenagers will claim, it is biologically of individual patients within a third party payer possible to live without a cellphone health care system would be the same as regardless of your economic individual consumers of products in a free station. market system just because they are the same And rationing does occur at the individual. consumer level. Notwithstanding the relative To sum up: A cellphone is not the same as low cost of a cellular phone, up to 30 million a coronary artery bypass graft. Americans do not own one interestingly similar to the number who lack health Chris Rangel, a hospitalist, writes at insurance likely because of the expense of RangelMD.com, where this post originally the phone and cellular service. Additionally appeared. and unlike almost all of healthcare, most consumer products scale based on quality Op-ed submissions of up to 600 words are and cost. Consumers ration their purchases welcomed. Please e-mail proposals to based on what type and what quality of
editor@payersandproviders.com

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