Stanley Feld M.D.,FACP,MACE
“Debt, sector trends may push HCA to sell some hospitals” was the title of the article in the Nashville Business Journal August 2, 2006.
“Under new ownership, HCA Inc. may use its time as a private company to spin off some of its slower-growth markets to pay down debt and reward investors before re-emerging on the public markets.” HCA executives deny this is the intent.
$20 billion dollars in equity ($31 billion sales price-$11 billion debt) was removed from the company and replaced with $5.5 billion plus $26 billion in debt. The article goes on to say that : The buyers hope to pay down their own debt with HCA’s $3 billion in annual cash flow before possibly taking the company back to the public markets.
HCA typically maintain 25% to 40% share in its markets to be able to create networks, have better negotiating power and create efficiencies of purchasing power. However, in a quick overview of DRG payments available online my first reaction is that HCA’s fees are higher than the average fees in the community.
The Nashville Business Journal points out: “The new owners could sell some assets as they attempt to withstand the strong headwind the industry faces. In addition to announcing its sale, HCA missed second-quarter profit expectations on weak volume and saw an increase in bad debt expense.”
The most important part of the statement is HCA missing its second quarter profit on weak volume and an increase in bad debt expense.
The Healthcare System faces many ills. A gigantic ill is that a noble profession has turned into a Big Business with all the greed we have experienced in other corporate businesses in the last 5 years.
The business of medical care should be efficient effective care on the ill with a strong emphasis of keeping people well and out of the hospital. Until we convert the former view of healthcare as a big business around to a service whose goal is to prevent illness the faster we will be on the Road to Repairing the Healthcare System. How is this accomplished with all the stakeholders being treated fairly and have the opportunity to be innovative and make a good profit? I believe the solution will be the use of common sense and common goals to align all the stakeholders incentives. I believe it will happen before the healthcare system breaks down completely.