February 15, 2010

Consultant: Wheaton's profits undercut by insurance deal

Steve Clark, of TrendEdge Consulting in Racine, wrote in with a new perspective on Wheaton-Franciscan Health Care's business dealings:
One aspect of this discussion that has not been covered is the recent domination of the local Racine marketplace by United Healthcare.

Prior to the take-over by Wheaton, All Saints contracted independently with insurance carriers and because they were the only game in town, they were able to negotiate highly profitable contract terms; as one doctor mentioned, All Saints used to always be profitable and "in the black". When Wheaton acquired All Saints, that stopped the practice of independent contracting with insurance companies; being part of a larger corporate entity, All Saints now had to contract as a group along with other Wheaton facilities. This eliminated the leverage All Saints used to have due their status of being the only game in town. This opened the door for United Healthcare and other PPO networks which had strong contractual agreements with Wheaton Corporate.

So, if you are following me here, what happened is that All Saints now collects approximately 15-20% less from their most profitable customers because over the course of 2-3 years, the insurance coverage of all those customers migrated to UHC. Look around town, with the exception of Case and Ruud, almost every large business in the area moved to United Healthcare because they had significantly lower rates as a result of their strong contracts with Wheaton Corporate. Whereas SCJ and RUSD used to pay All Saints $.75 on the dollar, they are now paying Wheaton $.55 on every dollar billed.

Wheaton's management made an enormous mistake when they stopped letting All Saints contract independently in my opinion. Combine this with the problems resulting from their new billing system (that cost time/money and patients) along with a down economy where fewer people have insurance and those that do are not paying their deductibles and out-of-pocket costs, then throw in the increasingly high medicare/medicaid patient mix (that for the most part lose money), and you have an economic disaster on your hands. Not to mention, this all took place while major capital investment projects were going on.

So in the end, All Saints was hit by a perfect financial storm that was due to hit us like this eventually.


  1. This comment has been removed by a blog administrator.

  2. What does it take to get blocked on this site. You can't be taken serious if you don't have a moderator to block these kind of posts.

    Clean it up Dustin and Pete!

  3. Anon 7:26pm, This is a free speech site. Simply because you do not agree with the semantics used by a previous poster should not mean they should not be take seriously. Furthermore obviously this individual is upset with how things are being handled. Should this individual used a more PC choice in wording? Possibly, however I get the jist of what he or she is talking about. Sorry that individual hurt your ears, put your ear muffs on.

  4. Thanks, Steve, but the first comment did cross a line. We'd love to keep the comment, but can't edit out particularly offensive phrases. If the commenter would like to resubmit their thoughts minus the more crass statements, we'd appreciate it.

  5. I understand your position Dustin. There is allot for you guys to filter through with this subject.

  6. Steve,

    How does $.55 on every $1 billed compare to medicare billing vs an average Medicare DRG reimbursement? If I assume that "most" private insurers provide apprx 30% more reimbursement for their enrolled participants than the gov't does for a Medicare patient, how does $.55 per $1 compare? Seems to me that healthcare providers would be rewarded by over billing. I'm under the impression that this form of billing was obsoleted back in the late 80's. What checks and balances exist within this paradigm? What am I missing? Thanks


  8. Wheaton's next big mistake is picking the wrong electronic healthrecord system. There is a scoop for the Racine post and the journal times!

  9. While it is difficult to know how financially viable WFHC/All Saints actually is or is not, here are the most recently available disclosures for the fiscal year ending June, 2009, from the WHA (WI Hospital Assn) data base, (available on www.wipricepoint.org)
    Hospital charges about $750 Million
    of which about $364 M was paid. Commercial insurances paid an average of 71% on HOSPITAL charges, Medicare 34%, Badgercare/Medicaid only 30%. Charity care and bad debt was about $105 M or 14% total. Note these data represent only HOSPITAL charges, not charges or receipts for professional/physician services and outpatient facility fees, like office visits. About $7,000,000 was hospital charges for T/L-spine (but not C-spine) surgery during that year, the type of surgery Dr. Prpa performs in case you wondered.