Julie Creswell

I’m well aware that a good fraction of the people in this country – let’s call them Rush fans – spend their lives furious at the New York Times. I am not one of them. I love the Grey Lady; it would be high on my list of things to bring to a desert island. But every now and then, the paper screws up, and it did so in a big way in its recent piece on the federal program to promote healthcare information technology (HIT).

Let’s stipulate that the Federal government’s $20 billion incentive program (called “HITECH”), designed to drive the adoption of electronic health records, is not perfect. Medicare’s “Meaningful Use” rules – the standards that hospitals’ and clinics’ EHRs must meet to qualify for bonus payments – have been criticized as both too soft and too restrictive. (You know the rules are probably about right when the critiques come from both directions.) Interoperability remains a Holy Grail. And everybody appreciates that today’s healthcare information technology (HIT) systems remain clunky and relatively user-unfriendly. Even Epic, the Golden Child among electronic medical record systems, has been characterized as the “Cream of the Crap.”

Continue reading “The HIT Job”

Share on Twitter

Julie Creswell and Reed Abelson offer a story in the New York Times about the HCA for-profit hospital system, noting “A giant hospital chain is blazing a profit trail.”  The HCA story and similar ones about other hospital chains financed by private equity force us to consider how a such firms can achieve a return on equity that satisfies investors.

The answer is that they cannot, if we think about running the business on a long-term basis.  What makes it work is extracting cash and the exit strategy, the heart and soul of private equity.

As Warren Buffett might say, let’s keep this simple.  A for-profit hospital system has the following disadvantages vis-a-vis a non-profit hospital system:  (1) Its finances are a mixture of equity and taxable debt, both of which are more expensive than the nontaxable debt of a non-profit; (2) it pays taxes–federal and state income tax, property tax, and sales tax–on which the non-profit is exempt; and (3) it is an unattractive vehicle for charitable donations, compared to the tax-advantages offered donors of non-profits.

These are hefty financial advantages for non-profits, which nonetheless are fortunate if they are able to earn an operating margin of 3%.  Admittedly, that’s 3% of revenues, not a 3% return on capital.

An equity investor in a for-profit doesn’t care about margin, strictly speaking, but rather is focused on the rate of return of his or her investment.  But let’s stick with the operating margin just for a moment, and let’s just accept that a 3% margin would not generate the kind of equity return demanded by the market place:  You pick the hurdle rate:  15%, 20%, 25%, more?  It doesn’t matter.  A three percent margin just doesn’t get you there.

Continue reading “Let’s Do the Numbers”

Share on Twitter
MASTHEAD STUFF

MATTHEW HOLT
Founder & Publisher

JOHN IRVINE
Executive Editor

JONATHAN HALVORSON
Editor

JOE FLOWER
Contributing Editor

MICHAEL MILLENSON
Contributing Editor

ALEX EPSTEIN
Director of Digital Media

MICHELLE NOTEBOOM Business Development

MUNIA MITRA, MD
Clinical Medicine

Vikram Khanna
Editor-At-Large, Wellness

THCB FROM A-Z

FOLLOW US ON TWITTER
@THCBStaff

WHERE IN THE WORLD WE ARE

The Health Care Blog (THCB) is based in San Francisco. We were founded in 2004 by Matthew Holt and John Irvine.

MEDIA REQUESTS

Interview Requests + Bookings. We like to talk. E-mail us.

BLOGGING
Yes. We're looking for bloggers. Send us your posts.

STORY TIPS
Breaking health care story? Drop us an e-mail.

CROSSPOSTS

We frequently accept crossposts from smaller blogs and major U.S. and International publications. You'll need syndication rights. Email a link to your submission.

WHAT WE'RE LOOKING FOR

Op-eds. Crossposts. Columns. Great ideas for improving the health care system. Pitches for healthcare-focused startups and business.Write ups of original research. Reviews of new healthcare products and startups. Data-driven analysis of health care trends. Policy proposals. E-mail us a copy of your piece in the body of your email or as a Google Doc. No phone calls please!

THCB PRESS

Healthcare focused e-books and videos for distribution via THCB and other channels like Amazon and Smashwords. Want to get involved? Send us a note telling us what you have in mind. Proposals should be no more than one page in length.

HEALTH SYSTEM $#@!!!
If you've healthcare professional or consumer and have had a recent experience with the U.S. health care system, either for good or bad, that you want the world to know about, tell us about it. Have a good health care story you think we should know about? Send story ideas and tips to editor@thehealthcareblog.com.

REPRINTS Questions on reprints, permissions and syndication to ad_sales@thehealthcareblog.com.

WHAT WE COVER

HEALTHCARE, GENERAL

Affordable Care Act
Business of Health Care
National health policy
Life on the front lines
Practice management
Hospital managment
Health plans
Prevention
Specialty practice
Oncology
Cardiology
Geriatrics
ENT
Emergency Medicine
Radiology
Nursing
Quality, Costs
Residency
Research
Medical education
Med School
CMS
CDC
HHS
FDA
Public Health
Wellness

HIT TOPICS
Apple
Analytics
athenahealth
Electronic medical records
EPIC
Design
Accountable care organizations
Meaningful use
Interoperability
Online Communities
Open Source
Privacy
Usability
Samsung
Social media
Tips and Tricks
Wearables
Workflow
Exchanges

EVENTS

TedMed
HIMSS South x South West
Health 2.0
WHCC
AHIP
AHIMA
Log in - Powered by WordPress.