In Health Care Cutting Costs Is Paying Off for Investors-Business Analytics May Create Profits but Without Balance Care Suffers
Posted Jan 13 2011 6:47pm
We also now have private equity firms buying hospitals. There’s a hospital and clinic group in southern California called Prime Healthcare and they basically bought up hospitals who were upside down financially and many times it was either a purchase or go out of business. I believe the group is over all hedge fund backed. This is kind of an oxymoron of sorts but private equity firms are getting to have such a large hold in healthcare that they formed a NON PROFIT organization to discuss and plan on HOW TO PROFIT.
This could in fact be a new coined paradigm here, a “non-profit” place where the “for profits” gather to talk about how to make more money from healthcare and compare those portfolios.
Former HHS Director Mike Leavitt has also jumped in here with the financial side of things.
This is kind of my home territory in Orange County and I remember how busy all the hospitals were before they were purchased and all took insurance and had contracts with insurance companies. Prime, although I think it is changing a little bit, does not sign contracts with insurance companies and bills their normal and customary fees. That created huge balance billing problems with the likes of Kaiser and Tenet going to battle as well as patients over the charges, especially when patients were seen out of network at a Prime facility.
Today, you can roll bowling balls through the parking lots of the once busy hospitals at they have “Cadillac” ER rooms but not very many inpatients as insurer groups direct patients elsewhere. Everything that was not deemed profitable and not necessary for the operation of a hospital—gone.
I caught a bit of the JP Morgan investors meeting with Google CEO and Aneesh Chopra and from what I heard, they aren’t buying medical record technology, first of all because they don’t understand it, and secondly I can bet you most don’t use any of it as a patient like they want everyone else to use. It’s like driving a car, you have to do it to be able to see value and last by not least have the ability to obey the law.
Mr. Chopra is a great optimist but it didn’t fly past those investors and even Eric Schmidt with their own Google Health was not coming to bat very strong either, and this is not to say he didn’t have confidence in what they were doing, it more or less related back to the huge glut of unmanageable software that is out there and the fact that the folks that work in the ALGORITHM business see it too, just like I talk about here all the time.
Stay tuned as I try my best to educate and let folks know some of the behind the scenes intangibles and connect some dots you may not see connected otherwise. Heck we rely on Google’s algorithm worldwide as the #1 choice to find what we want on the web with meta data. GOOGLE HAS A GREAT HANDLE ON ALGORITHMS!!
Nobody wants to admit we made a big mess out of medical software for the sake of profit and now nobody has a clue as to who’s going to prevail and where to sock any money. The government should have started trying to encourage collaboration a long time ago but it’s not their fault entirely as we had 8 years of shear IT Illiteracy in the White House that paid no attention and saw little or no value and it’s catch up time.
It’s funny too that United Healthcare gets mentioned here as I have been focusing on their subsidiaries quite a bit here and most have no clue on how health insurance subsidiaries work and how they are now combining data for intelligence on steroids. You can input the words subsidiary watch and come up with a bunch of posts here to that effect on the Medical Quack.
Investors are trying to figure out who’s got the cost and profit algorithms set in place to make the most money and need proof of that, look at Goldman Sachs and Facebook. What are they investing in, a bunch of algorithms and some servers that store images to be blunt, but more so it’s the data value and the ability to sell and market is the driving force. Facebook is not a tangible item you can hold in your hand and neither is much of the other items that folks are investing in; however, they do affect the quality of our lives and balance is needed, otherwise we will have crappy lives with cost running everything.
So when this bottoms out and all the costs are cut, what’s going to be left? Sure technology will eliminate more jobs and automate even further with additional outsourcing to other countries, like China, as it was the hot topic at the JP Morgan convention, so look around and figure it out. We need to read up and get smart out there as this is technological war far on more fronts that you can even imagine. BD
Investors in health-care stocks have reason to feel ill: In 2010 the Standard & Poor's North American Health-Care Index had the smallest gain among the seven North American sector indexes. It rose by a mere 4.3 percent, vs. 26 percent apiece for the technology and cyclical-stock sector indexes. The industry is beset with challenges, from the uncertainties surrounding health-care reform to a wave of patent expirations that will arrive with manufacturers facing a dearth of blockbuster drugs in the pipeline. Still, leading health-care fund managers spy plenty of opportunities to profit in 2011.
"Age and wealth are the biggest determinants for health-care spending now, driven by a preference for [a healthier] lifestyle," says Hunt. "Overall, you're going to see an increased blurring of the lines between consumer enterprises and health-care companies" as the solution to health-care spending turns increasingly to putting more pressure on individuals to change their behavior.
Jenner singles out UnitedHealth Group ( UNH ), which has quietly been acquiring dozens of private companies with health-care IT capabilities that will be able to monitor treatment outcomes, as well as disease-prevention efforts. The market is slowing recognizing the company's growing resource base, but this will continue to play out over the next few years, says Jenner. One of United's pilot programs educates orthopedics patients on nonsurgical options and has resulted in a nearly 50 percent decline in hip and knee replacements among its members, says Rouven Wool-Lewis, T. Rowe Price's analyst for managed-health-care stocks.