HOSPITALS/HEALTH PLANS: HCA and United—Someone blinked

After being at war in several markets for the past few months (Florida and Denver come to mind) HCA has agreed a national contract with UnitedHealthcare. United has been having member retention problems in N. California, meanwhile losing a major client might have hurt HCA’s bid to go private. So someone clearly blinked here. Anyone got an idea as to who?

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  1. On November 5th, HCA held a “Roadshow” luncheon in NYC in connection with the upcoming sale of $5.7 billion of bonds related to its LBO. At that meeting, CEO, Jack Bovender mentioned that the company was extremely close to a resolution with United. The official announcement came later that afternoon. The contract is apparently multi-year and is provides for both case rate and per diem payments with supposedly reasonable annual escalators. Importantly, whatever HCA does with its chargemaster rates will have no impact on rates paid by United. For 2007, HCA will raise chargemaster rates by 10%. Bovender mentioned that in the context of warning investors to expect its bad debt charges to keep rising. Under accounting rules, uninsured patients are billed at chargemaster rates, and the subsequent write-offs are also at chargemaster rates.
    Separately, in response to another question regarding the impact on HCA’s business model if it were paid for all of its currently uncompensated care but had to accept Medicare rates from all patients, Bovender indicated that he thought the probability of a single payer system was remote even after 2008, it is not built into its intermediate term planning, and, if it were implemented, it would probably bankrupt half the hospitals in the country.

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