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The pace of transformation within the healthcare industry has accelerated in 2018. Within this edition of PNC Healthcare Matters, we discuss the potential impact of tax reform on tax-exempt financing and related interest rate risk management. We also provide insight into the potential for the healthcare industry to use distributed ledger technology to gain efficiencies. And this edition discusses the role of responsible investing and gives an overview of how investors view healthcare.
At PNC Healthcare, we endeavor to help find clarity, opportunity, and growth through the rapid change within the industry, and in this edition of PNC Healthcare Matters we are delighted to provide additional insight on strategies for navigating through the industry headwinds successfully.
If you would like more information on any of the articles in this edition, or if you would like to share your perspective on these topics, we would love to hear from you.
We also welcome your thoughts on additional industry topics or issues that you would like to learn more about in future editions. Feel free to reach out to your Healthcare Relationship Manager or me directly at brian.r.kelly@pnc.com. We would enjoy the opportunity to discuss your ideas and feedback.
On behalf of everyone on the PNC Healthcare team, we sincerely appreciate your relationship and your continued interest in PNC's perspective.
For investors, the healthcare industry’s secular growth rate is appealing, but the profitability outlook isn’t as clear. During 2017, a key question for investors was the sluggish pace of commercial patient utilization, a trend that resulted in generally softer than expected hospital admissions and a less favorable payor mix.
Recent legislation may drive the tax-exempt cost of debt higher. It is important to actively monitor and manage one’s debt and derivative portfolio. Policy implications can and do impact the composition of the balance sheet with the unintended consequence of moving a borrower along the risk spectrum. Active management can ensure the desired risk and debt composition.
The healthcare industry is a prime candidate for data disruption fueled by margin compression, payment reform, the incentivizing of quality and value of healthcare and the persistence of antiquated manual processes that produce marginal results. One solution 20% to 50% of healthcare executives are exploring is blockchain technology.
We are all familiar with the medical credo “do no harm.” For healthcare systems that already operate under this premise, incorporating the credo into their investment portfolios can be the next step. Here we define how responsible investing (RI) is helping to change the dynamics between institutional investors, such as healthcare systems, and the ways they achieve their goals in alignment with their values.
Identifying Missed Revenue Opportunities
Since 2000, there has been $538 billion worth of care provided for which no payment has been received. An unpaid claims analysis should be performed on a regular basis to measure any revenue loss that may be occurring due to sub-optimal claims management processes. An effective analysis can help organizations determine process issues, payer problems, and site-of-service issues to help staff redesign processes, improve technology integration and increase revenue moving forward.
Hospitals in Transformation
The current healthcare environment is marked by intense pressure, rapid change and deep regulatory uncertainty. U.S. hospitals are struggling to adapt to this tumultuous and increasingly complicated environment, failing at an alarming rate. Through qualitative and quantitative research with hospital executives across the country, a new study examines how changes in healthcare today are impacting these institutions and what they are doing to survive.
Is a Securitization a Viable Financing Option For You?
Securitization may allow your company to efficiently leverage the value of your accounts receivable into a low-cost, committed financing platform. In practice, your company will receive cash due from its accounts receivable immediately, and such proceeds can be used for any corporate purpose, including reducing more expensive debt or reinvesting into the business.
Changes Ahead For LIBOR
The London Interbank Offered Rate (LIBOR) is a benchmark interest rate for seven maturities (overnight to 12 months) quoted in five currencies. LIBOR is widely used as a benchmark rate in lending, borrowing and derivative transactions, relating to an estimated $350 trillion of financial instruments. The Financial Conduct Authority (FCA) believes the markets supporting LIBOR are no longer “sufficiently active” to ensure the rate is representative of market conditions. Now what?
Refunding Valuation Analysis: An Issuer’s Decision Tool
PNC Capital Markets LLC has built a new model to value call options of tax-exempt fixed rate bonds to assess refunding efficiency. Called “ReVal," it differs from standard industry practice that typically use a form of the Black-Schole Option Pricing Model.
ReVal’s pragmatic approach to defining “Peak” Present Value Savings looks at historical relationships between MMD and U.S. Treasury securities to estimate a point in time that will achieve Peak Present Value Savings. Is the ratio of Refunding Efficiency sufficient to execute the trigger for your organization?
Identifying and Collecting Patient-Responsible Balances
With the evolution of high-deductible health plans and health savings accounts, consumers are now responsible for a larger portion of their healthcare expenditures. Currently 29% of covered workers are enrolled in a high-deductible health plan/healthcare reimbursement account (HDHP/HRA) or healthcare savings account (HSA-Qualified HDHP). This shift can lead to a rise in bad debt.
Many leading healthcare providers identify and collect patient-responsible balances prior to service and/or at the time of service, significantly increasing the likelihood of timely payment for services performed. Find out how your organization can benefit from these best practices.
Enterprise Risk Management: Consider Both Sides of the Balance Sheet
Incorporating both sides of the balance sheet can be essential to properly managing a healthcare organization’s enterprise risk in a holistic manner. Furthermore, doing so can help to maintain a level credit rating, stabilize Days Cash on Hand, and comply with debt covenants.
By performing an Enterprise Risk Management analysis, a healthcare system can calibrate its investment portfolio to help ensure that it is optimized relative to its liabilities. Over the near term, this can help to provide continuity of operations; over the long term, we believe that this can help to fuel organizational growth.
Making Sense of Uncertainty: The First PNC Healthcare Executive Symposium
PNC Healthcare’s first annual PNC Healthcare Executive Symposium created a unique environment for executive level discussion and dialogue on key industry challenges.
Twenty-six CEOs and CFOs attended. Key organizations represented included Highmark, the Cleveland Clinic and Penn Medicine. The two-day event opened with a networking reception and a dinner presentation on cybersecurity, followed by a day of discussions about the key issues facing boards and management, including:
A new way to evaluate liability portfolio risk
When it comes to managing liability portfolios in the healthcare industry, standard practice consists of evaluating finance alternatives based upon a comparison of cost of capital followed by an assessment of the risk of each product alternative. Developed by PNC’s Capital Markets group, a new process starts with assessing risk in your healthcare system’s existing liability portfolio.
7 trends that will drive the year in healthcare
Many healthcare systems have experienced weakness in financial performance that requires them to examine their current strategies, the adequacy of their information systems and the revenue and cost assumptions under which they were operating. This article shows how successful organizations are addressing these issues.
Benchmarking cash posting automation
PNC’s 2016 survey of Healthcare Client Advisory Board members tracks trends in cash posting and associated cost reduction potential. Survey results can help you benchmark your own processes and point the way toward improvement.
Mitigating pension risks in a volatile environment
Pension plan sponsors are faced with a volatile political landscape that presents significant opportunities and risks. The uncertainty facing the Affordable Care Act is just one of the issues that sponsors will face in 2017 and beyond. Do you have a legacy defined benefit plan, or are you looking at a potential merger where your liability needs to be considered?
Veterans Health Administration (VHA) Teams With PNC to Reduce Administrative Costs
In an industry where only 56% of aggregate claims are paid electronically[1], the Veterans Health Administration’s eBusiness Solutions team receives more than 85% of its claim payments via Electronic Funds Transfer (EFT). Like the veterans it serves, VHA has achieved its goals through a disciplined approach to its mission.
Beginning in 2003, with PNC’s help, the eBusiness Solutions team began a focused outreach campaign to maximize enrollment of insurance payers for electronic claim payments and remittances (835s).
PNC Epic Case Histories Demonstrate Measurable Improvements
More than 60 Epic clients, representing 20 health systems, presented case studies on Epic integration, shared information and networked with peers in the healthcare industry. During the forum, Penn Medicine presented a detailed case study showing how they automated cash reconciliation by implementing the Epic Cash Management module using custom lockbox files from PNC.
The Miracle of a Proactive Strategy
Denials prevention/management and patient payment estimation/collection are two areas where hospitals have historically taken a reactive approach and continue to fall short from the standpoint of performance. Although providers can correct and resubmit claims, submit appeals to payers, and bill patients 30 to 60 days after their healthcare service has been rendered, these approaches are time consuming and costly. Hopefully, your organization’s approach to these critical functions doesn’t require a “miracle” to get it under control.
The Road Ahead in U.S. Healthcare - Will Patients Take the Wheel?
With the passage of the Affordable Care Act and other recent trends in the U.S. healthcare system, we are experiencing a paradigm shift toward patient-centered care. PNC Healthcare commissioned Shapiro+Raj to explore this shift and what it means for the future of healthcare. This white paper summarizes the results of their study.
The Frugal Healthcare Provider - Saves and Earns with PNC's P-Card Program
Shannon Medical Center in San Angelo, Texas, has served the Concho Valley for more than 80 years. Today it is licensed for 400 beds and is the designated lead level 3 trauma center for the region. The locally-owned health system has a nationally-recognized intensive care unit and critical care for fragile newborns is also among its many services. In order to continue to grow and deliver the state-of-the-art services its diverse community requires, the hospital has maintained the frugal nature of its founders, J.M. and Margaret Shannon. Shannon’s Board of Directors keeps a laser focus on the bottom line.
Healthcare Advisory Board Update
With the passage of the Affordable Care Act and other recent trends in the U.S. healthcare system, we are experiencing a paradigm shift toward patient-centered care.
Healthcare Virtual Card Payments — Just the Facts
Healthcare regulations continue to focus on ways to reduce cost and increase efficiency for both Providers and Health Plans, including a renewed emphasis on electronic payments. Electronic Funds Transfer (EFT) payments sent via the ACH Network are now considered a HIPAA transaction; therefore, Health Plans are required to provide EFT payments if requested by a Provider.
Are You Ready for Chip Cards?
In October 2015, a new technical standard for credit cards will be introduced. The standard is also known as Europay, MasterCard® and Visa® or EMV, after the developers of the technology. It is designed to ensure that microchip-embedded payment cards (chip cards) are compatible with the terminals of merchants who accept them.
PCI DSS: The Security Your Customers Are Looking For
Cybercriminals are just like any other criminal — they prey on the weak and vulnerable. And they are discovering that many small merchants have not implemented even the most basic security measures.
Get to Know Greg Jelinek
In October, 2014, PNC Healthcare welcomed Greg Jelinek as our new executive vice president.
PNC Healthcare Matters Newsletter is for informational purposes only. No part of this document may be reproduced in any manner without the prior written permission of PNCCM. Under no circumstances should it be used or considered as an offer to sell, or a solicitation of an offer to buy, any of the securities or other instruments mentioned in it. The information contained herein is based on information PNCCM believes to be reliable and accurate, however, no representation is being made that this document is accurate or complete and it should not be relied upon as such. Neither PNCCM nor its affiliates make any guaranty or warranty as to the accuracy or completeness of the data set forth herein. Opinions expressed herein are subject to change without notice. The securities or other instruments mentioned in this document may not be eligible for sale in some states or countries, or suitable for all types of investors; and their value and returns may fluctuate and/or be adversely affected by changes in exchange rates, interest rates, or other factors.
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