For-profit hospitals see credit advantage, nonprofits struggling

Filed under: Health Care |

The credit market is loosening for some sectors of health care — those with an investor base.

While nonprofit hospitals are still struggling because of reduced access to credit, and because they are getting out of high-yield and risky investments, investor-based, private hospitals stand to gain market share from their competitors.

“Credit is looser than it used to be — at least for some sectors,” said Anthony Giordano, vice president of BKD Corporate Finance. “Those specialty hospitals, acute care hospitals with investors, those can find sources for credit.”

Giordano just completed a financing deal for an acute-care hospital that had an investor base — and he said there was no shortage of senior lenders, private equity lenders and “mezzanine lenders” who wanted to provide credit for the hospital’s capital expansion.

“The investors wanted to use senior lenders, banks, instead of private equity, because they didn’t want to give up any equity. But there was no shortage of groups who wanted to lend.”

Part of the reason is that health care is still a growing market, and health care businesses with investors have a pool of money that might not be available to nonprofit hospitals.

“We saw groups who do nothing but lend to health care,” Giordano said. “It’s just what they do, and they understand reimbursement rates, Medicare rates, insurance. It’s complicated for people who don’t have experience with health care groups.”

Colorado Springs’ hospitals are both not-for-profit, and both have significant capital debt from recent expansions. Neither plans further construction nor capital spending in the upcoming year.

Chicken pox still poses threat, despite vaccination

Children of parents who refuse vaccines are nine times more likely to get chicken pox than fully immunized children, according to Kaiser Permanente’s Colorado Institute for Health Research.

The study is the first of its kind to examine the relationship between parental vaccine refusal and the risk of varicella infection in children. The study used electronic health records of more than 86,000 children who were members of Kaiser Permanente Colorado between 1998 and 2008.

Varicella is one of the most commonly refused childhood vaccines, likely due to parental perceptions that chicken pox is the least severe of all vaccine-preventable diseases.

Childhood vaccinations have led to dramatic reductions in a number of serious childhood illnesses, but the number of parents re-using immunizations is on the rise.

“Many parents question the need for vaccinations,” said study lead author Jason Glanz. “This study provides evidence to counter the misperception among vaccine-refusing parents that their children are not at risk for potentially serious illness.”

Varicella is a highly contagious disease that causes a high fever, an itchy rash and red spots or blisters all over the body. The disease can pose a severe risk for children, especially those with bad eczema, cancer or HIV. It also can cause serious complications in pregnant women and newborns. Prior to the widespread use of varicella vaccine in 1995, there were 4 million cases annually, resulting in more than 10,000 hospitalizations and 100 deaths per year in the U.S. Hospitalizations have been reduced by more than 80 percent since the vaccination.

Reform debate continues — so does the cost of care

New information from the Centers for Medicare and Medicaid Services show that health care spending grew 4.4 percent during 2008, showing that costs are growing faster than the overall economy.

The data also shows that the portion of the gross domestic product devoted to health care continues to increase, even during the recession.

“The latest national health expenditure data demonstrate why health care reform needs to include a long-term strategy to reduce the growth of health care costs,” said Karen Ignagni, president and CEO of America’s Health Insurance Plans.

CMS figures show that, despite the slowdown, national health spending reached $2.3 trillion, or $7,681 per person, and the health care portion of the GDP grew from 15.9 percent in 2007 to 18.2 percent in 2008.

The trend is also reflected in the cost of premiums. The Department of Health and Human Services’ National Health Expenditure Accounts show that private health insurance costs rose from $604 billion in 2003 to $817 billion in 2008, an annual growth rate of 6.2 percent. The information gathered by HHS shows that administrative costs are rising at a lower rate than the cost of care.

Surveys by national health care organizations show that Americans as a whole — while skeptical about health care reform — are concerned about costs of care. About 56 percent of Americans polled by the American Health Solution believe their costs will increase, and 53 percent think costs are the biggest issue with health care. About 40 percent of Americans think lowering costs should be the top priority of reform.

Amy Gillentine covers health care for the Colorado Springs Business Journal.