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.
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: