Posted on April 10, 2014
Implementation of the Affordable Care Act has affected capital market views of the hospital and health system sector. During key sessions at ANI: The HFMA National Institute, expert speakers will describe rating agencies’ views of the impact of reform on the healthcare industry and will outline the current capital market outlook for healthcare organizations.
One featured speaker at ANI will be Martin Arrick, a managing director at Standard & Poor’s Ratings Services. Arrick will present “The Capital Markets and the Health System Sector,” during which he will identify key areas of interest for rating agencies and outline the current capital market outlook for healthcare organizations.
In this article, Arrick discusses the importance of transparency regarding the use of alternative financing products by hospitals and health systems.
Alternative Financing: Risks Require Effective Disclosure
The use of alternative financing products such as bank loans and direct-purchase debt has increased among not-for-profit healthcare providers in the United States. Although there are benefits to using some of these alternative financing products, such as low cost of capital and less traditional “put” risk, we believe it is important to highlight the risks of these new products and reiterate the need for greater transparency to rating agencies and debt markets.
With greater use of these direct-purchase obligations and a more diverse group of banks and financial institutions entering into these types of financings, the terms and covenants in the agreements are less clearly defined and less uniform than many of the traditional documents used in fixed- or variable-rate capital market financing. This situation creates, in our view, the potential for considerable credit risk exposure. Of particular concern to us is the frequent absence of disclosure of these agreements’ existence and their terms in a timely manner, notwithstanding whether privately placed debt carries legal disclosure obligations. Although the impact of the Affordable Care Act is increasing financial pressures on healthcare providers, bank loans with attractive terms should be considered carefully by issuers and disclosed in full whether or not they are on parity with outstanding debt issuance.
Private placements or direct-purchase obligations can have substantial implications for the credit quality of an obligor’s capital market debt. Implications can include, among others, acceleration and the potential for cross–default provisions between privately placed debt and capital market debt. Some documents contain events of default provisions or covenants that, in our view, favor the lender over existing capital market bondholders, and as a result may subordinate the claims of an issuer’s capital market lenders relative to those of the private placement lender, thereby increasing the potential for triggering the financing’s remedies. Combined with cross-default provisions and “most favored nations” clauses, breached covenants and default events could accelerate not only privately placed obligations, but also capital market debt. This effect could in turn create a liquidity crisis for the issuer and potentially have multi-notch negative rating implications.
Disclosure of privately placed debt is critical to the ratings process, because where event-driven risk exists, we evaluate the likelihood of the issuer triggering acceleration, termination payment, or collateral posting requirements. We further assess management’s capacity to respond to these types of liquidity demands, whether through available balance sheet liquidity, capital market access, or lines of credit. We also assess the relationship of the current rating to rating triggers in the covenants, cure periods, and the financing’s other specified terms that define default events. If, in our view, the likely demand on liquidity is high and available liquidity is inadequate to cover repayment risk, we could consider a negative rating action or outlook change. The extent to which management both demonstrates an understanding of the risks that direct-purchase bonds and loans could present and has plans or policies to mitigate them plays an important role in our assessments of the credit quality implications of these types of financings.
We believe that delayed disclosure of any financing does not serve the market well, particularly where the financing’s covenants could pressure liquidity and potentially lead to negative rating implications. This is particularly true for healthcare providers facing new and often unpredictable financial burdens—such providers should be erring on the side of full disclosure and assessment now more than ever.
Posted on March 10, 2014
The major changes needed in health care require leaders to execute many complex changes in structure and process, from clinical integration to cost management to revenue protection to decision support. The featured speakers and breakout sessions at ANI 2014 show how to excel is all of these areas.
Clinical Integration/Culture: Learn how to align nurses and finance professionals to drive value from nurse leader Pamela Thompson, CEO, American Organization of Nurse Executives. Related sessions show you how to:
Cost Management/Margin Transformation: Learn how to engage physicians to improve outcomes and efficiency from renowned diagnostician Gurpreet Dhaliway, MD, Associate Professor of Clinical Medicine at the University of California, San Francisco. Related sessions show you how to:
Revenue Cycle: Learn keys to excellent patient financial communication from leading patient advocates Terry Rappuhn, leader of HFMA’s Patient Friendly Billing® Project, and Mark Rukavina, President of Community Health Advisors, LLC. Related sessions show you how to:
Business Intelligence & Analytics: Learn the IT ramifications of the era of accountability from healthcare IT luminary John Glaser, CEO, Health Services, Siemens Healthcare. Related sessions show you how to:
Posted on February 11, 2014
The need to reduce costs and improve quality is driving significant and rapid changes in the shape of the U.S. healthcare system, including reform in the way hospitals, physicians, and payers are organized; the way healthcare providers are paid; and the regulatory landscape.
The featured speakers and breakout sessions at ANI 2014 cover these formidable changes.
Organizing for Value: Learn how to succeed in the new value-based business model from integrated financial-strategic planning expert Ken Kaufman, Chair, Kaufman Hall. Related sessions will show you how to:
Payment Trends: Learn about emerging payment methods from payment reform pioneer Francois de Brantes, Executive Director of the Health Care Incentives Improvement Institute. Related sessions will show you how to:
Regulatory Impact of Reform: Learn where we are now on the path to reform from policy expert Andrew Croshaw, Partner, Leavitt Partners. Related sessions will alert you to:
Finance & Operations: Learn how the capital markets are viewing the rapidly changing healthcare sector from industry analyst Martin Arrick, Managing Director of Standard and Poor’s. Related sessions will show you how to:
Posted on January 6, 2014
Distinguished surgeon, teacher, and writer Atul Gawande, MD, will be the keynote speaker on Monday, June 23, at ANI: The 2014 HFMA National Institute in Las Vegas.
Gawande will address clinical transformation in an era of healthcare reform, emphasizing the delicate balance between improving quality, managing risk, measuring performance, and managing cost. Gawande brings an eloquence and an intellect to these issues that allow him to offer deeply considered and thoughtfully expressed solutions with implications for health care.
Gawande is a General and Endocrine Surgeon at Brigham and Women’s Hospital in Boston and the Dana Farber Cancer Institute, and a staff writer The New Yorker magazine. He is also Professor of Surgery at Harvard Medical School, Professor in the Department of Health Policy and Management at the Harvard School of Public Health, and Research Director for the BWH Center for Surgery and Public Health. Gawande is the founder and chairman of Lifebox, a not-for-profit organization saving lives by improving the safety and quality of surgical care in low-resource countries.
He received his BAS from Stanford University, an M.A. (in politics, philosophy, and economics) from Oxford University, his MD from Harvard Medical School, and his MPH from the Harvard School of Public Health. Gawande served as a senior health policy advisor in the Clinton presidential campaign and in the Clinton White House from 1992 to 1993. He is the director of the World Health Organization’s Global Challenge for Safer Surgical Care.
In 2006, Gawande received the MacArthur Award for his research and writing. He is the author of three brilliant bestselling books: Complications, a finalist for the National Book Award in 2002; Better: A Surgeon’s Notes on Performance, a New York Times bestseller and one of Amazon.com’s ten best books of 2007; and The Checklist Manifesto, also a New York Times bestseller. Gawande was chosen to The 2010 TIME 100 at number five in the thinker category and his New Yorker article, “Letting Go” was a finalist for the 2011 National Magazine Award for public interest.
Posted on January 6, 2014
Daniel H. Pink, known for changing the world of work, will kick off ANI: The 2014 HFMA National Institute on June 22 in Las Vegas.
According to Pink, healthcare leaders at every level today confront two stark realities. First, in these fiercely competitive and endlessly turbulent times, they must do more with less. Second, the old-school management techniques they have long relied on to produce results frequently fail. Bestselling author Pink will offer a fresh look at how all leaders must enhance their skills in persuading, influencing, and motivating others. He will describe three specific personal traits and identify specific skills that will improve professional effectiveness.
Pink is the author of five provocative books about the changing world of work, including the long-time New York Times bestseller A Whole New Mind and the number-one New York Times bestseller Drive.
His latest book, To Sell Is Human: The Surprising Truth About Moving Others, is a new perspective on the art and science of selling. Pink draws on a rich trove of social science for his counterintuitive insights. He reveals the new ABCs of moving others (it’s no longer “Always Be Closing”), explains why extroverts don’t make the best salespeople, and shows how giving people an “off-ramp” for their actions can matter more than actually changing their minds.
Pink’s articles on business and technology have appeared in many publications, including The New York Times, Harvard Business Review, The Sunday Telegraph, Fast Company and Wired. He has provided analysis of business trends on CNN, CNBC, ABC, NPR and other networks in the U.S. and abroad. He also advises both Fortune 100 companies and startups on recruiting, innovation and work practices.
A free agent himself, he held his last real job in the White House, where he served from 1995 to 1997 as chief speechwriter for Vice President Al Gore. He also worked as an aide to U.S. Labor Secretary Robert Reich and in other positions in politics and government.
He received a BA from Northwestern University, where he was elected to Phi Beta Kappa, and a JD from Yale Law School.
All Rights Reserved. Healthcare Financial Management Association.