Sunday, June 30, 2002

Keep abreast of insurance costs

Q. How do we deal with the threat of rising insurnace costs?
A. Many healthcare service providers have seen their insurance costs - general as well as patient liability - increase substantially during the past one to two years. Some markets such as long-term care and physician groups have seen insurance costs jump five to tenfold. Recently, numerous hospitals have also been reporting skyrocketing insurance costs and homecare providers have also seen their insurance costs rise.

In many other industries, a company could raise prices/rates to cover the increases in operating costs. In most healthcare markets, providers have fixed reimbursement and are unable to increase reimbursement from payers so their operating cash flow is negatively impacted by the substantial rise in labor and insurance costs. Some companies have gone out of business and others have been forced to divest assets to combat the rising costs of doing business in certain markets or geographical regions. Providers should be aware of the trend of rising insurance costs that are being experienced in other healthcare markets and consider the impact that these costs would have on their operations.

Tom Carden is v.p. of sales and marketing at Healthcare Business Credit Corp. Reach him at (800) 952-0245.