Wednesday, December 31, 2008

Debt is Bad for Healthcare

Props to HISTalk in his latest column featuring the review by Greg Halls blog note on Healthcare Profit and Debt and how this has essentially mortgaged off assets that were owned but that asset was sold off to show a profit.....

The concept is best summarized by comparing this to the fire service:
Examine the notion of ‘capacity utilization.’ Without debt, excess capacity is not viewed as a problem. Consider the local fire department. Paid staff resides at stations 100% of the time, regardless of emergency conditions. 100% state of readiness. Imagine if the fire station had to pay a mortgage: it would then be forced to convert its unused (excess) capacity to a cost, and in turn focus on raising revenues to support its excess capacity. This is exactly the case with hospitals (and many other large U.S. businesses).
So for the fire department they would need to service that debt and might be encouraged to start a few fires, find a side line business of fire extinguishers and perhaps even spin off various pieces to show profit - perhaps privatizing the ladder (front and back to different organizations that specialize in being the best at ladder work at the front). If we do that we could even turn our fire fighters into independent contractors paying those that have Self Contained Breathing Apparatus (SCBA) training higher salaries.....who would then tend to group in higher density areas where they would have more work and higher pay as a result.....

You get the picture. So as Greg suggests any restructuring or stimulus package must attend to the debt load accrued as a result of the "pirated equity" squandered by a procession of "B-school grads, many of them who found their way into health care as their widget of choice". Wouldn't it be nice if we could try and reclaim some of that wealth that got paid out as big fat bonuses similar to the one paid to Peter Kraus of Merrill Lynch to buy his $37 Million dollar apartment.

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