HEALTHCARE NEWS FLASH July 01, 2014
Table of Contents Sales & Marketing ................................................................................................................. 3 FINANCE ................................................................................................................................ 6 Technology ............................................................................................................................ 9 Strategy .............................................................................................................................. 12
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Sales & Marketing PinnacleHealth, Penn State Hershey Medical Center to Partner June 27, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/hospital-transactions-and-valuation/pinnaclehealthpenn-state-hershey-medical-center-to-partner.html Penn State Milton S. Hershey Medical Center and PinnacleHealth System in Harrisburg, ., have signed a letter of intent to form a new health system in central Pennsylvania. The new enterprise would be governed by a new board comprised of individuals from both Hershey and PinnacleHealth. Hershey and PinnacleHealth will continue to operate independently until the formation of the new health system is finalized and regulatory approvals are obtained, according to a news release. “In response to rapidly-evolving market conditions driven by healthcare reform, and with a continued focus on cost effective, high-quality care delivery and accessibility, PinnacleHealth System and Penn State Hershey see the formation of a combined health system as the way forward in maintaining a relentless focus on innovation, a commitment to quality patient care and the discovery of new and better ways to prevent, diagnose and treat disease,” said Harold L. Paz, MD, MS, CEO of Hershey, Penn State’s senior vice president for health affairs and dean of its College of Medicine, in the release.
National Jewish Health, Saint Joseph Hospital Strike Joint Operating Agreement June 26, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/hospital-transactions-and-valuation/national-jewishhealth-saint-joseph-hospital-strike-joint-operating-agreement.html National Jewish Health, Exempla Saint Joseph Hospital, and the hospital’s parent company, SCL Health System — all based in Denver — have signed a joint operating agreement. Under the agreement, the Denver healthcare organizations will jointly own a new entity that will aim to expand and enhance high-quality, affordable healthcare in both inpatient and outpatient settings, according to a news release. Clinical operations at both NJH and Exempla Saint Joseph will be jointly managed through the new entity. However, each organization will still retain its own assets and employees. NJH, SCL and Exempla Saint Joseph will also retain other components of their respective business operations, such as NJH’s research, educational and health promotion efforts. The entity is being formed as a nonprofit corporation and will officially start business this August. SCL and NJH originally signed a letter of intent last September to create the joint venture.
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“Through this collaboration, we are committed to clinical excellence, improved patient care and access, increased patient satisfaction and more affordable care,” said Michael A. Slubowski, president and CEO of SCL, in the release. “This truly is a transformational partnership that will elevate how care is provided by the outstanding physicians and caregivers associated with both hospitals.”
UnitedHealthcare, NYUPN Partner to Provide Coordinated Care June 26, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/accountable-care-organizations/unitedhealthcarenyupn-partner-to-provide-coordinated-care.html UnitedHealthcare is collaborating with NYUPN Clinically Integrated Network to provide coordinated care to more than 70,000 New York residents. The goal of the collaboration is to improve the quality of care for New York residents enrolled in UnitedHealthcare’s employer-sponsored health plans, while cutting healthcare costs. Those residents will have access to more than 1,700 healthcare professionals affiliated with NYU Langone Medical Center and the University Physicians Network, according to a news release. “We are partnering with UnitedHealthcare in one of the largest initiatives in the region to help improve all areas of our practice as we continue to provide the highest levels of quality care to our patients, reduce total medical costs and increase patient satisfaction across the region,” said Paula Marchetta, MD, president of NYUPN, in the release. The healthcare providers participating in the collaboration will receive monthly updates on their patients, which will allow them to better monitor their patients’ health. This enhanced monitoring system is being used to help physicians provide better treatment for chronic conditions such as diabetes and heart disease.
Geisinger, Holy Spirit Health System Sign Definitive Agreement June 24, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/hospital-transactions-and-valuation/geisinger-holyspirit-health-system-sign-definitive-agreement.html Danville, Pa.-based Geisinger Health System and Camp Hill, Pa.-based Holy Spirit Health System have signed a definitive agreement for Holy Spirit to become an affiliate of Geisinger. Last September, Geisinger and Holy Spirit signed a letter of intent to affiliate, and the organizations subsequently completed a due diligence process. The proposed integration now moves into the regulatory approval phase, which should take 30 to 45 days to complete, according to a news release.
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“This is an important step forward for Geisinger and Holy Spirit to enhance care in south central Pennsylvania,” said Glenn Steele, Jr., MD, president and CEO of Geisinger, in the release. “Holy Spirit has a 50 year history of providing high quality, compassionate care, and we are pleased to affiliate with an organization that shares our commitment to value and doing what is right for patients and the community.”
Northstar Health System, Aspirus Affiliate June 17, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/hospital-transactions-and-valuation/northstar-healthsystem-aspirus-affiliate.html Northstar Health System in Iron River, Mich., has finalized its affiliation with Wausau, Wis.-based Aspirus, effective July 1, according to a WLUC TV6 report. Northstar and Aspirus signed the official papers yesterday, making the 25-bed critical access hospital Aspirus’ fourth facility in Michigan and seventh overall, according to the report. Financial details were not disclosed. The health system and hospital originally signed an affiliation deal last December. At the time, Aspirus leaders said all Northstar employees would retain their positions, pay levels and benefits.
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FINANCE Moody’s Affirms St. Luke’s A2 Rating, Outlook Stable June 27, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/finance/moody-s-affirms-st-luke-s-a2-rating-outlookstable.html Moody’s Investors Services has affirmed Boise-Idaho-based St. Luke’s Health System’s “A2” rating and the health system’s stable outlook. The affirmation of St. Luke’s rating was based on the health system’s long-term record of maintaining strong and stable operating performance, its strong market presence, its clinical offerings and the favorable economy in Boise. St. Luke’s had poor financial performance in 2013. However, unaudited interim financials show the health system is returning to a stronger performance, as balance sheet measures have somewhat improved. The rating affects approximately $388 million of revenue bonds.
Healthcare Spending Decreased in Q1, Bureau of Economic Analysis Finds June 26, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/finance/healthcare-spending-decreased-in-q1-bureau-ofeconomic-analysis-finds.html Healthcare spending decreased by 1.4 percent year-over-year during the first quarter of this year, according to data released by the Bureau of Economic Analysis. Healthcare spending decreased gross domestic product growth by 0.16 percent. Overall, the GDP shrank by 2.9 percent year-over-year, according to the data. These numbers contrast significantly with a preliminary report the BEA released earlier this year, which indicated healthcare spending skyrocketed by 9.9 percent year-over-year. According to the BEA, the latest estimate is based on more complete source data. The increase in personal consumption expenditures in the first quarter ended up being smaller than previously estimated, while the decline in exports was larger. The GDP decrease was also driven by a decrease in nonresidential fixed investment and in state and local government spending, in addition to a decline in private inventory investment. After the release of the initial BEA estimates earlier this year, the White House attributed the healthcare spending spike to the Patient Protection and Affordable Care Act: “The sharp increase in estimated utilization appears to have been driven by greater use of healthcare services by people who gained insurance coverage during the first quarter because of the [PPACA]. Ensuring access to care is a key goal of the [PPACA’s] coverage expansion, so this increase in utilization is neither a surprise, nor a cause for concern.”
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A White House blog post about the latest BEA data maintains that healthcare spending growth will accelerate in the near future as millions gain coverage under the PPACA, despite the decline in the first quarter. “Because health care spending can be volatile on a quarter-to-quarter basis (2013:Q4, for example, was estimated to have seen growth somewhat above the recent trend), it can be useful to look at a longer time period,” Jason Furman, chairman of the council of economic advisors, wrote in a blog post.
Fitch Upgrades Universal Health Services Ratings, Revises Outlook to Stable June 25, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/finance/fitch-upgrades-universal-health-services-ratingsrevises-outlook-to-stable.html Fitch Ratings has upgraded King of Prussia, Pa.-based Universal Health Services’ ratings and revised the hospital operator’s outlook from positive to stable. The rating upgrades, which apply to roughly $3.2 billion of debt outstanding as of March 31, involve the following: Issuer Default Rating — to “BB+” from “BB” Senior secured bank facility rating — to “BBB-” from “BB+” Senior secured notes rating — to “BBB-” from “BB+” Senior unsecured notes rating — to “BB” from “BB-” Fitch issued the upgrades in response to various factors, such as UHS’ continued commitment to debt repayment and strengthening cash flows stemming from a stabilizing acute-care business, a drop in uncompensated care and behavioral health operations growth, according to the ratings agency. Additionally, UHS’ same-hospital admissions were flat in 2013, an improvement over the 2 percent and 2.2 percent declines in 2012 and 2011, respectively. Fitch also regards the Patient Protection and Affordable Care Act as a net positive for UHS and other hospital operators because of expected net revenue growth from decreases in uncompensated care this year and next year. However, Fitch also believes it’s likely that profit gains will drop in later years because of “an overall constrained healthcare reimbursement environment,” according to the release.
S&P: Providers Face More Credit Risk Than Insurers Under Healthcare Reform June 19, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/finance/s-p-providers-face-more-credit-risk-thaninsurers-under-healthcare-reform.html Health insurers’ credit quality will likely fare better under the financial pressures of healthcare reform than providers will, according to a Standard & Poor’s Ratings Services report.
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Declining utilization of services, healthcare reform and heightened merger and acquisition activity are all major factors affecting the financial performance and sustainability of companies in the healthcare industry, according to the report. In response to lower volumes and the changing industry, healthcare providers have been cutting costs. S&P predicts “these companies may have trouble reducing costs further without putting pressure on the current ratings.” Additionally, higher debt and top-line pressures could lower ratings for nonprofit and for-profit providers alike within the context of heightened M&A activity and pressures to deliver high-quality care at a lower cost, according to the report. Meanwhile, health insurers generally benefit from decreased utilization, although Patient Protection and Affordable Care Act rule changes and Medicare and Medicaid pay cuts could hurt them financially, according to the report. Additionally, insurers “possess the capital to withstand the current pace of M&A,” according to S&P.
CBO Maintains Original $124B PPACA Savings Estimate June 18, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/finance/cbo-maintains-original-124b-ppaca-savingsestimate.html In response to an inquiry from Congress, the Congressional Budget Office has reiterated its March 2010 projection that the Patient Protection and Affordable Care Act will reduce federal budget deficits by a total of $124 billion from 2010 to 2019 and by approximately one-half of 1 percent of gross domestic product during the following decade. CBO director Douglas W. Elmendorf wrote on the agency’s website that the CBO and Joint Committee on Taxation “have no reason to think that their initial assessment that the [PPACA] would reduce budget deficits was incorrect.” However, he also noted a retrospective analysis of the impact of current law is significantly different from a cost estimate for a proposed measure, specifically because it requires establishing a benchmark scenario that would have unfolded if the law wasn’t enacted, which is a “challenging undertaking that is beyond the scope of CBO’s usual analyses.” In a footnote that flew under the radar until earlier this month, the CBO stated in an April report that it’s no longer possible to assess the economic impact of certain provisions of the PPACA. The footnote states: “The provisions that expand insurance coverage established entirely new programs or components of programs that can be isolated and reassessed. In contrast, other provisions of the [PPACA] significantly modified existing federal programs and made changes to the Internal Revenue Code. Isolating the incremental effects of those provisions on previously existing programs and revenues four years after enactment of the [PPACA] is not possible.” The decision has sparked concern that a halt to CBO assessment’s will make it unclear whether the PPACA is actually reducing the federal deficit, in addition to shrinking the uninsured population. Earlier this month, Sen. Ron Johnson (R-Wis.) introduced legislation that would require the CBO to report annually on costs and revenues related to the PPACA. “CBO undoubtedly faces considerable challenges in separating the impact of the law from some of the other programs that interact with it, but it can and should be able to estimate those costs and impacts so that Congress and the American people understand the true scope of financial harm that Obamacare is causing,” Sen. Johnson said in a news release.
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Technology Allscripts, CSC, HP Partner to Battle Epic, IBM for DoD Contract June 25, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/healthcare-information-technology/allscripts-csc-hppartner-to-battle-epic-ibm-for-dod-contract.html Allscripts has partnered with CSC and HP to bid on the $11 billion Department of Defense Healthcare Management System Modernization contract to build the department’s next health information system. Under the bid, Allscripts’s electronic health record technology would be coupled with CSC’s and HP’s large-scale health IT expertise, creating a comprehensive system to serve the DoD’s approximately 9.7 million beneficiaries. “We are very pleased to partner with CSC and HP, organizations that share our commitment to innovation, interoperability and connectivity and our dedication to improve the quality of patient care,” said Paul Black, president and CEO of Allscripts, in a statement. “The CSC-led team will bring unparalleled expertise and experience to maximize the power, breadth and flexibility of Allscripts Sunrise and Allscripts population health management solutions.” Allscripts, CSC and HP are not the first to throw their hat into the ring. Earlier this month, Epic and IBM announced their intention to submit a joint bid for the project.
Global e-prescribing market to reach $887 million by 2019 June 20, 2014 | Fierce Health IT http://www.fiercehealthit.com/story/global-e-prescribing-market-reach-887-million-2019/201406-20 The global market for e-prescribing systems is expected to grow from $250.2 million in 2013 to $887.8 million by 2019, according to a report from Transparency Market Research. Government incentive programs are among the factors driving the market, which is expected to have a compound annual growth rate of 23.5 percent over five years, according to an announcement. The report foresees an immense potential for the growth in implementation of electronic health record systems that include e-prescribing. However, there are barriers, which include cost and a lack of high-speed broadband and IT professionals in rural areas. A literature review published last month in Perspectives in Health Information Management also cited implementation costs as one of the primary barriers to adoption of e-prescribing.
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North America is the fastest-growing market, according to the report, fueled by the federal incentive program in the U.S., though Europe is the largest market, also growing rapidly through eHealth projects such as European Patient Smart Open Services (epSOS) and Schleswig-Holstein Health Initiative. The nationwide health information network Surescripts recently reported that more than 1 billion prescriptions were routed electronically in the U.S. during 2013, up from 788 million the previous year. It routed 58 percent of eligible prescriptions, including 73 percent of those written by officebased physicians.
Aetna, Mercy Health Partner For Accountable Care June 19, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/accountable-care-organizations/aetna-mercy-healthpartner-for-accountable-care.html Aetna and Cincinnati, Ohio-based Mercy Health have announced they are forming an accountable care organization, which will be Aetna’s first commercial ACO in the Cincinnati area. The organizations are also introducing Aetna Whole HealthSM, a collection of benefits plans that will provide Aetna members access to coordinated care from 350 primary care physicians and 2,400 specialists, in the Cincinnati area. Aetna Whole Health SM will be available to self-insured businesses beginning July 1 for an effective date of September 1, and it will be available to fully insured businesses beginning August 1 for an effective date of October 1. “This agreement is part of our transformation to help keep patients healthier and also better manage their healthcare costs,” said Yousuf J. Ahmad, market president and CEO of Mercy Health, in a news release. “The people of Cincinnati will be able to access quality healthcare that delivers an exceptional experience at a lower cost,” said Nitin Bhargava, president of Aetna’s Ohio operations, in the release.
Boeing to Contract With Providence-Swedish, UW ACOs for Employees June 19, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/accountable-care-organizations/boeing-to-contract-withprovidence-swedish-uw-acos-for-employees.html Boeing selected two Seattle-based accountable care organizations — one affiliated with Providence Health & Services and Swedish Health Services, the other with UW Medicine —for its new Preferred Partnership option for employees.
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Beginning this fall, 27,000 Boeing employees in the Puget Sound area and about 3,00 retirees can choose either ACO for their personal and family health plans, according to a Seattle Times report. The plans take effect Jan. 1, 2015. Providence-Swedish Health Alliance includes the network’s clinics and hospitals, as well as The Everett Clinic, Pacific Medical Centers clinics, The Polyclinic, Proliance Surgeons and other care settings. Members of the UW Medicine network include Seattle Children’s Hospital, Seattle Cancer Care Alliance and the Overlake and Northwest Hospital centers and clinics, according to the report. Boeing officials say there are numerous incentives for using the Preferred Partnership option, including lower paycheck deductions to pay for care, larger company contributions to health savings accounts, no co-payments for visiting primary-care doctors in many cases and 100-percent coverage for generic-drug prescriptions.
Google Glass Startup Augmedix Strengthened With Dignity Health Partnership, Capital Infusion June 18, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/healthcare-information-technology/google-glass-startupaugmedix-strengthened-with-dignity-health-partnership-capital-infusion.html It’s been a good couple of weeks for Augmedix. The Google Glass startup concluded a successful pilot project with San Francisco-based Dignity Health, brought its total capital investment to $7.3 million and became an official Glass Certified Partner. Augmedix’s Google Glass app is able to push information gathered during a patient consult directly to most electronic health record systems, allowing Glass-wearing physicians to maintain eye contact with patients during consults. “[Physicians] put on Google Glass, walk in the clinic room and engage with the patient,” Augmedix CEO and co-founder Ian Shakil told Fox Business. “From that conversation, we generate notes, charts and documentation in real time.” The resulting notes and documentation need physician edits less than 1 percent of the time, according to Mr. Shakil. As part of the Dignity Health trial, three physicians have been using the Google Glass app since January. Early results show the amount of time the physicians spent entering information into the EHR system decreased from 33 percent of their days to 9 percent, and the physicians were subsequently able to increase the percent of their days spent with patients from 35 percent to 70 percent. Augmedix plans to use its recent capital influx to forge more partnerships with providers and expand throughout the country. Its new status as a Glass Certified Partner should help — just five companies were selected to create enterprise solutions for Google Glass, though one is Wearable Intelligence, which is fueling Boston-based Beth Israel Deaconess Medical Center’s foray into hands-free EHR access using Google Glass.
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Strategy Beaumont, Botsford and Oakwood Reach Definitive Agreement on $3.8B Merger June 24, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/hospital-transactions-and-valuation/beaumont-botsfordand-oakwood-reach-definitive-agreement-on-3-8b-merger.html Beaumont Health System in Royal Oak, Mich., Botsford Health Care in Farmington Hills, Mich., and Oakwood Healthcare in Dearborn, Mich., have reached a definitive agreement to combine their operations into a $3.8 billion healthcare organization. Under the agreement, the three organizations are creating Beaumont Health, a new nonprofit health system. Beaumont Health will include eight hospitals with 3,337 beds, 153 outpatient sites, 5,000 physicians and 33,093 employees, according to a news release. The three organizations signed a letter of intent in March to combine their assets, liabilities and operations under one nonprofit system. “This milestone demonstrates our mutual commitment to working together to improve quality, efficiency and value for our patients,” said Gene Michalski, president and CEO of Beaumont Health System, in the release. Mr. Michalski will serve as the initial CEO of the new health system. In addition, Mr. Michalski, Oakwood President and CEO Brian Connolly and Botsford President and CEO Paul LaCasse, DO, will sit on a “CEO Council,” which will oversee the transition. Each organization’s medical staff will remain independent, but a “Clinical Leadership Council,” led by physicians, nurses and other providers, will drive physician integration. “The work to integrate these three great organizations, while challenging, is progressing well,” said Mr. Connolly, in the release. “We see signs that we are indeed creating the healthcare system of the future — a system in which population health can truly be impacted in a very positive way while increasing quality and value for every family we are fortunate to serve.” The proposed merger now moves into the regulatory approval phase. With approval, the organizations expect to close the transaction in the fall.
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Financial Need is No Longer Leading Driver in Healthcare Acquisitions June 23, 2014 | Becker’s Hospital Review http://www.beckershospitalreview.com/finance/financial-need-is-no-longer-leading-driver-inhealthcare-acquisitions.html A new study released at the Healthcare Financial Management Association’s 2014 National Institute in Las Vegas has found acquisitions and affiliations in the healthcare industry are being driven more by strategy than by financial need. In the past, acquisitions typically involved a stronger healthcare system acquiring a weaker one. The researchers found the current trend involves more mergers and acquisitions between organizations that are financial equals, with an aim of improving quality of care or cost-effectiveness of care. The study identified many of the key drivers of acquisitions and affiliations in the healthcare marketplace today such as operational efficiencies, creating clinically integrated care delivery networks and accessing sufficient populations for population health management. “Affiliations that improve value for patients and other care purchasers are likely to be well received,” said Joseph J. Fifer, CPA, president and CEO of HFMA, in a news release. “When a merger or acquisition happens for the right reasons, everybody wins.”
Value-based contracts will hurt profits, execs say June 19, 2014 | Fierce Healthcare http://www.fiercehealthcare.com/story/value-based-contracts-will-hurt-profits-execs-say/201406-19 Healthcare providers expect the industry shift to value-based contracts will negatively impact their organizations’ bottom lines, according to a new survey by KPMG, LLP. Nearly one-third of the 240 representatives from hospitals, physician practices, health plans and pharmaceutical companies polled said they expect value-based contracts to hurt profits. More than 12 percent said operating income will likely fall 10 percent or more due to these agreements. KPMG, a U.S. audit, tax and advisory services firm, conducted the polls as part of a series of webcasts held in April and May. The results show that providers are pessimistic about the value of these contracts, which link reimbursement from health plans and government payers to efficiency and the quality of care. When asked about the risk involved in moving to value-based contracts, 17 percent of hospital, system and physician practice providers said they expect a big drop in operating income. Only 4 percent were optimistic that the new model will result in a large rise in reimbursement. “I think there is still a lot of angst in the system, fear of the unknown, particularly in the markets fully baked in the fee-for-service environment,” Joseph Kuehn, a partner at KPMG’s Healthcare Advisory Services practice, told FierceHealthcare Thursday in an exclusive interview about the survey findings. “As they start thinking about the payment mechanism, it scares them.”
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Respondents believe the value-based model will create an enormous change to their organization’s patient care approach. Twenty-eight percent expect they will spend more time and resources on disease management to help patients cope with chronic illness like diabetes and cardiovascular disease. Nineteen percent view a greater reliance on nurse practitioners and physician assistants as the most significant change that will occur because of the new reimbursement model. The results of the survey follow the release of a study by ORC International that shows the majority of hospitals and payers currently implement a mix of value-based reimbursement and fee-for-service models, FierceHealthPayer previously reported. The study noted that 15 percent of payers and 22 percent of providers state the pay-for-performance model is extremely difficult to implement. Many cited technology impediments as a core problem, noting it’s hard to standardize and analyze data. However, nearly one-third of the respondents to the KPMG survey expect clinical information technology to have the biggest impact on the quality of care and patient outcomes--ahead of financial performance (15 percent), clinical operations (13 percent) and patient engagement (7 percent). Thirty-three percent expect the investment in more sophisticated clinical information systems will result in more effective use of clinical data and cost reductions of 5 to 10 percent; 17 percent expect to see cost reductions of more than 15 percent. Kuehn said that organizations that started to slowly incorporate value-based mechanisms into their models are beginning to see the benefits of them. He said it will take time for healthcare organizations to learn how to practice population health management and analyze data in a way to identify variability in care and costs. The transition “will be difficult,” Kuehn acknowledged, as organizations must identify communities’ needs, implement care coordination transitions, establish appropriate protocols and processes, and set up compensation incentives. However, he said that “if they can get past that initial fear, they will see that the transition is ultimately achievable and financially sustainable.”
Hospitals seek payer partnerships, risk-based contracts June 19, 2014 | Fierce Healthcare http://www.fiercehealthcare.com/story/hospitals-seek-payer-partnerships-risk-basedcontracts/2014-06-19 More hospitals participate in accountable care organizations (ACOs) and group purchasing organizations (GPOs) in hopes of improving cost efficiencies, according to a new report from ITG Market Research. In addition, more hospitals and health systems seek partnerships with federal and private payers for risk-based models like shared savings and bundled payments. Hospitals and payers also test more experimental approaches, according to the report statement. While a relatively small proportion of hospitals use risk-based contracting, nearly half of executives who do not currently participate in that model said they plan to implement it within the next year.
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Although most of the hospital executives surveyed are optimistic about the nation’s overall economy, many said they are waiting to see financial improvement within their own organizations. They expressed anxiety over the effects of the Affordable Care Act and lower reimbursements. More than 60 percent of 100 respondents named reimbursement cuts as a major concern, which Graeme Christianson, ITG director of healthcare market research, said suggests executives do not expect enough newly-insured patients to offset the expected losses from reimbursement cuts. This is especially true in states that have declined to expand eligibility for the Medicaid program under the ACA, FierceHealthcare previously reported. In light of these cost constraints, one in three executives said their organization had cut staff in the first half of the year, and more than 40 percent anticipated lower spending on large capital equipment in the next year.
Medtronic to acquire Covidien for $42.9B June 18, 2014 | Healthcare IT News http://www.healthcareitnews.com/news/medtronic-acquire-covidien-429b Medtronic, the medical device behemoth, announced plans this week to acquire rival Covidien for nearly $43 billion and move its headquarters to Ireland. “This acquisition will allow Medtronic to reach more patients, in more ways and in more places,” said Omar Ishrak, chairman and CEO of Medtronic, in a press statement announcing the deal. Covidien, which broke off from Tyco Healthcare in 2007, keeps U.S. headquarters in Mansfield, Mass., where it employs some 1,800 workers, but is incorporated in Dublin – enjoying a corporate tax rate of 16 percent. The firm has some 38,000 workers worldwide. Medtronic, which was founded in Minneapolis in 1949 and employs 46,000 globally, has already whittled its effective tax rate down to 18 percent, significantly lower than the statutory 35 percent corporate rate in the U.S. By setting up shop in Dublin – making it the “biggest company yet to escape the U.S. tax system by shifting its incorporation abroad,” according to Bloomberg – it will notch that rate down a few more points. But in an interview with Reuters, Ishrak insisted that the true impetus for the acquisition was to enable more capital to be devoted to technology innovation – to the tune of $10 billion over the next 10 years. “The real purpose of this, in the end, is strategic, both in the intermediate term and the long term,” said Ishrak. “It is good for the U.S. in that we will make more investment in U.S. technologies, which previously we could not.” Medtronic develops smartpumps, cardiac monitors, glucose meters and dozens of other devices. Covidien, which specializes in surgical products, makes a range of patient monitoring platforms and navigation systems. The merger of the two giants would create a company with combined annual revenue of $27 billion, rivaling the top medical device maker, Johnson & Johnson.
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“The medical technology industry is critical to the U.S. economy, and we will continue to invest and innovate and create well-paying jobs,” said Ishrak, in a statement. “Medtronic has consistently been the leading innovator and investor in U.S. medtech, and this combination will allow us to accelerate those investments.” “Covidien and Medtronic, when combined, will provide patients, physicians and hospitals with a compelling portfolio of offerings that will help improve care and surgical performance,” said José E. Almeida, chairman, president and CEO of Covidien, in a statement.
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