Look What is Happening Even Before the Ink is Dry on the HCA-KKR Deal

Stanley Feld M.D., FACP, MACE

Before I start, in paragraph 3 of the last blog there is a misprint; the words “going public” should be “going private”.

Even before HCA buyout is completed “Insurer,hospital at odds on rates”

“The blockbuster deal this week to take HCA Inc. private comes as the hospital giant conducts intense negotiations with insurer United Healthcare over proposed rate increases that, if not resolved by Sept. 1, could force as many as 850,000 Colorado residents to pick new hospitals and doctors.”

HCA and United Healthcare Insurance are not even close on agreed rates. I predict this is going to happen in every city all over the country where HCA has a significant hospital bed presence.

HCA’s present financial statements reflect relatively thin margins after debt service. The margins will just get worse after the buyout is complete since the debt service obligation increased by 15 billion dollars. It seems the only way for the survival of HCA is to increase their rates. The impact to the Repair of the Healthcare system can be predicted right now. The impending fiasco seems inevitable.

It is time for government officials to provide some real leadership. It is time to enact forceful and effective legislation to Repair the Healthcare System. It is time that the people demand this leadership from their elected officials.

It is long past the time to continue to create rules and regulations in an archaic bureaucratic hierarchy. The result is the creation of ineffective patches onto a broken system. The solution to HCA’s predicted strategy is to construct the new DRG payment system using community rating and stick to it. I mean a payment system that considers the actual cost of service in the community short of debt service and inflated overhead. A reasonable profit should be added to the community rated cost structure. It is ineffective to create a system that will consider the cost of services provided and include the exaggerated overhead and debt service of the institutions into the cost of service. Unfortunately, this would create a significant burden to HCA and to KKR’s investment, but it would decrease the cost of healthcare to society.

The non profit community hospitals with small debt will have a tremendous cost advantage even though they would collect less money than they would under the old DRG system. With a little increase in efficiency of delivering care and quality of care, these community non profit hospitals can drive down the cost of care even further. If they do they should be rewarded. There is little incentive in the system presently to reward providers for decreasing the complications of chronic disease. Unfortunately, it looks like the efficient focus factories will be penalized by the new DRG system, whereas the debt overloaded hospital systems will get their debt serviced by the government.

How do we, the patients, and potential patients, demand a system that is cost effective and driven by quality for the benefit of the major stakeholder, the patient? To me politics means power. Politicians need our vote in order to have power.

I also told you that no one else has been able to fix the healthcare system. <u>It is up to us</u>, the people, and our vote.