Byline: Mary Chris Jaklevic
From a rush to fill positions left by those called to active duty to worries that the military effort will siphon dollars from the nation's healthcare spending, the call to war has had a range of effects on the nation's healthcare companies.
Analysts said a short-term conflict shouldn't affect the demand for services, but those seeking capital in the public markets could experience a delay. ``This disruption should clear once the conflict ends,'' said Mark Francis, director in the Chicago office of the healthcare investment banking group of Houlihan Lokey Howard & Zukin.
As of late last week, Cleveland (Ohio) Clinic Health System planned to go ahead with a $1 billion debt restructuring scheduled for this week. However, an increase in interest rates since March 12 could prompt some bond-refunding transactions to be put on hold until conditions become more favorable, said Michael Fitzsimons, head of the bond desk at Cain Bros., New York.
Analysts interviewed last week did not anticipate the conflict would affect the pace of mergers and acquisitions.
Health plans that administer the military's Tricare insurance program reported a spike in enrollment as reservists were called to active duty. However, at least one firm said the increase is not large enough to affect its financial results.
Lisa Haines, spokeswoman for Health Net, Woodland Hills, Calif., said the company saw about 3,500 reservists enrolling each month in Tricare in January and February vs. the usual 500. Health Net covers about 1.5 million Tricare enrollees in 11 states. Some reservists continue to receive healthcare benefits from their peacetime employers. But she said, ``Some may not have insurance and some insurance may not be as good as the Tricare benefits.''
Haines said Tricare represents about 15% of the company's revenue, which was $10.2 billion last year. ``It's more beneficiary outreach that we've been involved in the past couple of months, but we're not reporting huge numbers (of new enrollees),'' she said.
Other companies that contract with Tricare include Humana, Louisville, Ky.; Sierra Health Services, Las Vegas; and TriWest Healthcare Alliance, Phoenix.
Meanwhile, staffing the nation's military hospitals amid a healthcare workforce shortage has been a challenge for Spectrum Healthcare Resources, an affiliate of Team Health, Knoxville, Tenn. The company has a contract to fill empty positions at as many as 61 military hospitals and 34 outpatient clinics.
Last week, Spectrum reported filling about 80 positions and said it was recruiting to fill 200 more. The company declined to say how much revenue it expected to generate from the extra business.
George Tracy, Spectrum's executive vice president, said Spectrum has been recruiting for such critical positions as anesthesiologists, emergency room nurses, intensive-care nurses and obstetricians.
Spectrum staffs about 3,300 positions in military facilities on an ongoing basis. Tracy said temporary staffing ``is something we normally don't do.'' He said Spectrum increased its recruiting and credentialing staff 20% to 72 people to help meet the demand.
On another front, Triad Hospitals, Plano, Texas, is coping without its chief financial officer, Burke Whitman, who was called to temporary active duty with the U.S. Marine Corps. The company said Whitman's duties would be performed by a variety of company officers, and his absence would have no significant impact on day-to-day operations.
On a broader scale, healthcare industry analysts worried that the cost of going to war and providing security at home is diverting the nation's financial resources, especially money that could be going to Medicare and Medicaid.
``I see it as a long-term funding issue. What does this war effort and the cost of funding it do to the larger ability that we have to fund healthcare?'' said Martin Arrick, a not-for-profit healthcare analyst at Standard & Poor's. ``The other issue is, what does the war effort do to the overall economy, employers' ability to pay for insurance over time, and the number of people employed vs. the number of people unemployed?''
CAPTION(S):
Tracy: Recruitment is challenging during a time of war.
