News in brief - Jan. 12, 2004

Hospital bad debt expected to rise - Hospital turns to physicians for help - HealthSouth board members resign - Companies secure URAC accreditation

Hospital bad debt expected to rise

Hospitals will likely have higher amounts of bad debt this year as patients are responsible for a greater percentage of their health care expenditures, according to a new report by a financial firm.

The Dec. 10, 2003, study by Susquehanna Financial Group found that receivables from individuals are the primary source for bad debt at the nation's hospitals. And because individuals are expected to be responsible for a greater portion of payments this year due to rising insurance premiums and increases in co-pays and deductibles, hospitals should expect to see more bad debt.

"While the companies may be able to offset some of this impact in other areas, our conclusion is that earnings will be negatively impacted," the report said.

Forensic accounting analyst David Haushalter said in a news release that so far it appears several hospital companies have failed to incorporate the effects of the projected increase in self pay into their bad debt expense for 2004.

"It's difficult to determine exactly what fraction of a company's revenues will end up as bad debt expense," he said. "However, it is clear that this fraction is likely going to be greater in the future than it has been in the past."

Hospital turns to physicians for help

A Pennsylvania hospital has turned to its local physicians and community members to help it recover from its troubled financial straits. The Pittsburgh Business Times has reported that Aliquippa Community Hospital in Beaver County, Pa., is seeking personal loans in $50,000 increments as it attempts to emerge from Chapter 11 bankruptcy.

The hospital reportedly is seeking the loans to demonstrate that it has community support, which would help it secure a larger, permanent loan. The hospital hopes to raise $1.25 million from the loan program, the newspaper reported.

The two-year loans would be paid back at a 12% interest rate, according to the Pittsburgh Business Times. Physicians associated with the Beaver County Medical Society declined to comment on the proposal.

HealthSouth board members resign

Two longtime HealthSouth directors have stepped down in the wake of a legal settlement that called for an overhaul of the board at the embattled outpatient services giant.

George H. Strong and Charles W. Newhall III voluntarily resigned from the board Dec. 15, 2003, HealthSouth said. They are the first of five board members expected to step down over eight months as part of a settlement with the Teachers Retirement System of Louisiana, a group of shareholders.

The shareholders sued HealthSouth in the wake of a massive accounting scandal that has resulted in numerous guilty pleas from executives and the indictment of founder Richard Scrushy.

Under the agreement, new board members will be chosen with input from shareholders. HealthSouth said its search for new board members had begun and it was working toward filling the vacancies "as soon as practicable."

Companies secure URAC accreditation

Two specialty health care services companies -- American Specialty Health Inc. and MedRisk Inc. -- have become the first companies to have their HIPAA security compliance programs accredited by URAC.

ASH, San Diego, is a complementary and alternative medicine benefits provider, and MedRisk, King of Prussia, Pa., offers specialty networks and claims management technology to the workers' compensation industry.