The fall of the house of AHERF: the Allegheny bankruptcy.

The $1.3 billion bankruptcy of the Allegheny Health, Education, and Research Foundation (AHERF) in July 1998 was the nation's largest nonprofit health care failure. Many actors and factors were responsible for AHERF's demise. The system embarked on an ambitious strategy of horizontal and vertical integration just as reimbursement from major payers dramatically contracted, leaving AHERF overly exposed. Hospital and physician acquisitions increased the system's debt and competed for capital, which sapped the stronger institutions and led to massive internal cash transfers. Management failed to exercise due diligence in many of these acquisitions. Several external oversight mechanisms, ranging from AHERF's board to its accountants and auditors to the bond market, also failed to protect these community assets.

Lessons from the Allegheny bankruptcy.

On July 21, 1998, the nonprofit Allegheny Health, Education, and Research Foundation (AHERF) filed for bankruptcy, with $1.3 billion in debt and 65,000 creditors. The Pittsburgh-based organization had pursued an aggressive strategy of acquiring physicians and hospitals in the Philadelphia area. Its dramatic collapse prompted the entry of a for-profit hospital chain into the Philadelphia market, as Tenet Healthcare Corp. purchased eight hospitals from AHERF at firesale prices. This Issue Brief chronicles the hows and whys of the nation's largest nonprofit health care failure, and analyzes its lessons for other struggling academic health centers.

The trouble I've seen.

David James is a professional crisis manager. For almost 30 years, his job has been to rescue companies on the brink of bankruptcy. By the time he's called in, it's usually too late to save much for the shareholders. In almost every case, however, there is still a lot to salvage: Nearly all the companies James has managed continue to operate in some form. More than 2 billion Pounds have been repaid to banks and unsecured trade creditors. And more than 30,000 jobs have been saved. The key to preserving value, James has found, is to resist the urge to try to generate cash from operating the business. In most cases, these companies have taken on far too much debt to ever sell their way out. Indeed, trying to expand operations beyond what the market would bear was what got them into trouble in the first place. James argues against waiting until the company is dead to break it up. A more effective course is to sell off valuable assets while the company is still a going concern. In vivid and sometimes hair-raising detail, James recounts how he has discovered valuable assets in unexpected places, salvaging everything from airlines to soft-drink makers to Britain's Millennium Dome. He has a routine for accomplishing this, which involves locking up the checkbook on day one and, more often than not, firing the senior management. His is a cautionary tale for top executives who, it is clear, should be concentrating their efforts on never needing to call on him in the first place.

Health care insolvency and bankruptcy.

Bankruptcy is an event that is often considered a business' worst nightmare. Debt, lawyers, and the U.S. government can lead to the eventual destruction of a business. This article shows how declaring bankruptcy can be a helpful instrument in continuing a successful venture in the health care marketplace.

'Prepackaged' bankruptcy wraps up process quickly.

Charter Medical Corp. has joined a small group of companies that have turned to prepackaged bankruptcy plans to quickly and efficiently restructure debt. By reaching agreements with creditors before going to court, distressed companies can shorten the time it takes to emerge from bankruptcy and greatly reduce expensive professional fees.

Coping with Medicare overpayments and other cash-flow problems: bankruptcy and nonbankruptcy alternatives.

Over the last several years, many home care agencies have encountered serious financial difficulties as a result of, among other reasons, Medicare's attempts to recover alleged overpayments. Depending on the cause of the financial difficulties, a provider, in consultation with accountants and attorneys, may decide to restructure its business through either a nonbankruptcy workout or a Chapter 11 bankruptcy filing.

Financial performance of health plans in Medicaid managed care.

OBJECTIVE: This study assesses the financial performance of health plans that enroll Medicaid members across the key plan traits, specifically Medicaid dominant, publicly traded, and provider-sponsored. DATA AND METHODS: National Association of Insurance Commissioners (NAIC) financial data, coupled with selected state financial data, were analyzed for 170 Medicaid health plans for 2009. A mean test compared the mean values for medical loss, administrative cost, and operating margin ratios across these plan traits. Medicaid dominant plans are plans with 75 percent of their total enrollment in the Medicaid line of business. FINDINGS: Plans that are Medicaid dominant and publicly traded incurred a lower medical loss ratio and higher administrative cost ratio than multi-product and non-publicly traded plans. Medicaid dominant plans also earned a higher operating profit margin. Plans offering commercial and Medicare products are operating at a loss for their Medicaid line of business. POLICY IMPLICATIONS: Health plans that do not specialize in Medicaid are losing money. Higher medical cost rather than administrative cost is the underlying reason for this financial loss. Since Medicaid enrollees do not account for their primary book of business, these plans may not have invested in the medical management programs to reduce inappropriate emergency room use and avoid costly hospitalization.

Healthcare resources and expenditure in financial crisis: scenarios and managerial strategies.

OBJECTIVE: What are the implications of financial crisis on healthcare expenditure? This paper explores different approaches applied across European countries focusing on the role that managerial tools may have in coping with this challenge. METHOD: The paper reports the results of recent studies on responses to financial crisis from European countries and which are the techniques they had applied to reallocate resources. RESULTS: Although resources scarcity, some governments did not reduce the healthcare expenditure because they believe in its focal role on the economic development and on maintaining social cohesion and protection of vulnerable people. Other countries decided a strong reduction of costs which often has affected services delivered. In both cases authors suggest to avoid across-the-board cuts in favor of approach involving priority setting. CONCLUSION: The public sector has assumed new responsibilities following the global crisis and the rising demand for social services. Some countries shifted the healthcare costs from the public purse to private households undermining the survival of the health system and the universal coverage. A way to avoid this risk is based on the ability to share discussion about where to cut and where to reallocate resources.