Wednesday, June 24, 2020

Carlyle Group to Make High Medical Bills Higher

The Carlyle Group wants to make more healthcare deals, according to co-CEO Kewsong Lee.

Two areas the firm likes include health care and technology.
In early 2020 Carlyle bought Trust HCS and MAK Systems.  A January 13th press release on the Trust HCS deal stated:

WindRose Health Investors, LLC ("WindRose"), the New York-based healthcare private equity firm, announced that it has completed the sale of substantially all of the assets of its portfolio company, Trust Healthcare Consulting Services, LLC ("TrustHCS" or the "Company"), to a healthcare joint venture established by an affiliate of The Carlyle Group and Cannae Holdings. Terms of the transaction were not disclosed.
TrustHCS is a provider of staffing and advisory services for coding, clinical documentation improvement ("CDI"), denial management, and coding education solutions. TrustHCS leverages its team of 500+ professionals to provide best-in-class solutions that enable its clients to accelerate revenue cycle, improve revenue integrity, and reduce operating costs.
Trust Healthcare Consulting Services, headquartered in Springfield, Missouri, is a provider of staffing and advisory services that improve the financial strength of healthcare organizations. The Company's services and oversight improve the reliability, integrity and security of our clients' financial health and enables clinicians, HIM, revenue cycle and clinical documentation improvement leaders gain visibility, insight and control of financial outcomes associated with every patient encounter.
Carlyle's website makes no mention of the Trust HCS deal.  JV partner Cannae's issued the following statement in November 2019:

Cannae Holdings, Inc. (NYSE:CNNE) (“Cannae” or the “Company”) today announced that it has entered into an agreement to participate in a health care joint venture with an investment vehicle advised by an affiliate of The Carlyle Group and another investor with deep health care services experience. The joint venture will focus on acquiring, integrating and operating synergistic health care services companies in the provider and payer space. 

Cannae will contribute its T-System business to the joint venture and Cannae’s joint venture partners will contribute equity capital to enable it to acquire other complementary health care services companies. As part of this effort, T-System has also entered into a definitive agreement to acquire a leading provider of coding and clinical documentation services to domestic health care providers which will be funded by the joint venture. 
The investment vehicle affiliated with The Carlyle Group will be the majority controlling shareholder of the joint venture..
Consider the impact of T Systems for citizens in Savannah, Georgia.

A few months after transitioning to T-System’s RevCycle+® service, Memorial University Medical Center’s revenue quickly increased to the numbers T-System had estimated. And, just a few months later, revenue continued to improve even further to $1,269 per patient visit, from the original baseline of $1,040 per patient visit.
$24.8 million gross annual revenue increase:
• $259 increase per patient for facility E/M charges\
• $31 increase per patient for facility procedure charges
• $502 increase per patient for observation services charges
A higher level of service was assigned for about 65 percent of the ED patients, and a lower level of service was assigned to three percent. Also, a higher level of service was assigned for about 70 percent of observation cases.

Maximizing healthcare reimbursement is a decades old game.  It got current Florida Senator Rick Scott in trouble when he was President of hospital giant HCA. 

KKR and Bain Capital bought HCA in 2006 and conducted an IPO in 2011.  KKR/Bain continued selling stock in HCA in 2013. 

KKR and HCA pair bid on surprise medical biller Envision but HCA fell away. KKR completed that deal alone.

Carlyle's new joint venture overlaps with surprise medical billing

Could T System/TrustHCS be encouraging the use of surprise medical billing? 

While Congress funneled trillions in coronavirus relief to prop up Wall Street it has done nothing on surprise medical billing.  Washington Monthly reported:

The stakes are high in this fight not only because surprise bills are so unjust, but also because it engages the most important long-term issue in health care: rising and unsustainable costs. 

Eliminating surprise billing entirely would save people with employer-provided health insurance approximately $40 billion annually. Compared to the $3.6 trillion the U.S. now collectively spends each year on health care, that is not a large amount. What makes the legislative battle over surprise billing so important is less the savings it could produce than what the fight itself represents: a dry run for broader reform. If Washington cannot deal with a problem so obviously egregious, it is difficult to envision how it could address rising costs more broadly.
Congress decided the PEU boys need that $40 billion more than citizens need relief from unjust practices. 

The Guardian reported HCA's recent PEU like strategies.

HCA is currently pushing employees to accept several concessions to pay and benefits, including wage freezes, elimination of 401k retirement contributions, and signaling the possibility of layoffs, with non-union employees already forced to accept freezes to annual wage and salary raises.
HCA received about $1bn in federal coronavirus relief that does not have to be repaid, and over $4bn in accelerated medicare payments.
Moody's recently reviewed HCA and stated:

HCA also has industry leading profit margins and makes significant investments in its key markets in order to drive future organic growth. HCA has a long track record of stable operating performance and strong cash flow
Just as Congress prioritized surprise medical billing over fair practices for the common person, HCA places profits over fair treatment of employees.

Meanwhile, private equity firms look to make hay from the Fed and Uncle Sam's cash fire hose.  Carlyle saw China scramble over the coronavirus and bought blood plasma software company MAK Systems in February.  Carlyle affiliate Ortho Clinical received federal money to develop COVID-19 antibody tests, which help with blood plasma treatment (MAK Systems).

How many $1 million COVID-19 medical bills can PEU healthcare make?