Archive: April, 2011
"Scorched-earth tactics" is what the Tennessee-based Community Health hospital chain (they run the Chestnut Hill and Phoenixville hospitals, and 150 others) called the federal lawsuit against it by the rival Texas-based Tenet Healthcare chain (they run Hahnemann and St. Christopher's, among others) alleging "systematic" Medicare fraud in the way Community collects federal reimbursement for outpatients. Previous item and links here.
Scorching, all right: In hitting Community over the head (and trying to discourage Community's hostile takeover offer), Tenet may be bringing down the roof on top of the whole for-profit hospital industry. Already the suit has cost investors in both companies plenty.
Traders dumped Community stock, which fell more than 50%. But they also dumped Tenet, which fell 20%, and other chains. For-profit hospital bonds for both chains and others also traded lower, as investors worried the hospitals will have trouble paying what they owe once threatened government investigations are done with them.
The "Path to Prosperity" budget posted by the US House Budget Committee last week blames the rapid increase in US healthcare costs on unlimited Medicaid and Medicare payments for old and poor Americans, and recommends changing to a system of fixed subsidies to states and seniors. I asked Susan Phillips, chief of staff at Penn Medicine, the University of Pennsylvania hospital system, what impact the plan would have on hospitals like Penn, and whether it would likely succeed in easing medical inflation. (Corrected) Phillips responds:
"We do not have enough detail to accurately predict if the proposal would lower medical price inflation and improve coverage," or how exactly it would affect hospitals like Penn. "We can easily confirm that this proposal would lower federal spending on health care.
"We can easily confirm that this proposal would lower federal spending on health care.
Up the long double escalators through the pale airy lobbies to the top-floor Terrace ballrooms at the newly expanded Pennsylvania Convention Center, more than 200 members and friends of the Jewish Federation Real Estate (JFRE) group of Philadelphia hosted Mayor Nutter this morning for a developers' panel on how the next generation of Center City hotels, apartments, stores and offices might get built, on Market East and North Broad, now that Ed Rendell is no longer Governor, and public subsidies for private projects are drying up.
Federal grants and local tax breaks subsidized most of the 5,000-plus hotel rooms (Loews, Ritz Carlson, Meridian, and one of the Marriotts) that were built to accomodate the original Convention Center traffic, noted Paul Levy, head of the Center City District. "We used this to repurpose a lot of real estate that was vacant" or underused, boosting the downtown tourist industry, he said.
Today, "we need about 2,000 more hotel rooms to fully optimize" the expanded Convention Center," Levy said. (Not all Philly hotel owners agree, see my interview last month with Hersha Hospitality's Shah brothers; but no one argued at today's gathering.)
Shares of both Tenet Healthcare Corp. and Community Health Systems fell after Tenet sued Community alleging "systematic" Medicare fraud at Community's 150 hospitals.
Tenet says Community classifies thousands of emergency-room visitors whose treatment is limited to, for example, common tests for chest pains, as "admitted" patients, so it can gain higher federal reimbursements without providing extra care.
For violating Medicare criteria that distinguish between outpatients under "observation" and those actually "admitted," Community's "potential liability is well in excess of $1 billion," Tenet says.
Philadelphia's money-losing Tasty Baking Co. has agreed to be purchased by Flowers Foods, Thomasville, Georgia, for $4 a share. That's double the stock's recent price and a premium to anyone who bought the stock this winter, but a discount to Tasty share prices in recent years. Read Flowers' statement here.
The sale works out to $34 million in cash for Tasty's 8.5 million shares. "We are delighted to welcome Tasty's 740 dedicated employees and 413 independent sales distributors to the Flowers Foods family. Our plans are to invest in the combined business for sustainable and profitable growth, and they will be an important part of Flowers' ongoing success," says Flowers boss George Deese.
Flowers also says it will assume Tasty's "existing indebtedness" totalling around $131 million. That looks like good news for Pennsylvania taxpayers: Tasty had borrowed around $80 million for the company's new South Philadelphia plant, about half of which is owed to state programs, the rest to Citizens Bank and other lenders.
Evan Mills PhD, a US Government scientist, writes in a report he did on his own time that US indoor marijuana growers, using energy-intensive heat lamps, burn 1% of all US electric power (3% in California) and create pollution equivalent to 3 million cars each year.
Johnson & Johnson, the New Brunswick, NJ drug maker, has agreed to pay $70 million to settle US and UK charges the company illegally bribed doctors, medical personnel and others in Greece, Romania, Poland, and Iraq to use J&J's DePuy-brand breast impants or other J&J products, the Securities and Exchange Commission says here.
J&J says it's very sorry and it promises never to do it again: "These agreements reflect the recognition by (US Dept of Justice) and SEC of Johnson & Johnson’s voluntary disclosures and subsequent cooperation," and if it can keep clean for three more years, "the charges filed by the DOJ against a subsidiary company will be dismissed," the company says in this statement from J&J boss William C. Weldon.
A North Philly film distributor has set up a new company he and his backers hope will turn the video business on its ear by moving movies direct from studios to your home and mobile devices, cutting out the costly middlemen.
"Why can't we stream movies, from studios, to people, right now?" asks Tom Ashley, boss at Invincible Pictures, based at a block-long two-story soundstage at a converted former mail-sorting warehouse at Fifth and Oxford Sts. Ashley’s new firm, FlixFling, sends clients access to digital movies, direct from independent studios, on a per-view or a per-film basis.
Ashley built Invincible into an independent-film distributor by buying movies cheap and promoting local-theater screenings and DVD sales. But the rapid decline in DVD sales, as rental, cable, smartphone and Internet-access firms have quickly made it easier to watch movies online, forced him to look at new ways of reaching fans.