Flotte’s Notes on Alabama Medicine

Alabama Flotte’s Notes on

Alabama Medicine

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Alabama Public Health

· Alabama has had one of the highest infant mortality rates in the nation (it ranked 3rd-highest in 1996), owing in part to widespread poverty.

· The state's from heart disease of 305.5 per 100,000, compared to the national rate of 258.2. Alabama also ranked above the national rate in death rates from cancer, cerebrovascular diseases, accidents, traffic fatalities, and suicide.

· Smoking prevalence was 25.3% of adults age 18 and older in 2000. The rate of death from lung disease for 2000 was 72.5 per 100,000 people.

· The mortality rate from HIV infection was 4.6 per 100,000 population, lower than the national average of 5.3 per 100,000 population for 2000. There had been 6,706 documented AIDS cases reported through 2001.

State Funding

Medical Schools

· In 2007, the State legislature’s bond proposal called for $46 million for UAB, with another $20 million or more promised by the governor. UAB already receives the bulk of the health care dollars that are appropriated for the state of Alabama by both the federal government and the state. In addition, it receives additional funds from Medicare and Medicaid agencies for UAB's role as a teaching hospital. In fact, Children's Hospital receives 51 percent of its operating budget from Medicaid. Resources from the Hurricane Katrina disaster appropriations and the federal Office of Homeland Security were to be directed to establishing a network of first responders and tertiary-care centers. – Randy Brinson, PR 6/3/2007

· While Georgia spent about $7 per capita on medical education and has four medical schools, the state of Alabama spent $22 per capita on medical education. But the mission scopes of both the Medical College of Georgia and the University of Mississippi Medical Center involve providing indigent care for the residents of their states, relieving some of the burden on local governments. In Alabama, outside of Cooper Green Hospital – which serves the indigent needs of Jefferson County, and is funded by the county government -- there are no state or county health care networks to deal with indigent care on a systematic basis. – Randy Brinson, PR 6/3/2007

Medicaid

· Medicaid, which gets most of its $4.2 billion budget from the federal government, is slated to receive more than $470 million from the state during the current budget year, by far the largest single amount in the $1.8 billion General Fund budget. – PR 11/1/07

o Medicaid had received extra money from the federal government for 11 counties affected by Hurricane Katrina, but that revenue will not be available for fiscal 2009. In all, Alabama is expected to receive $135 million less in federal Medicaid money for fiscal 2009. The General Fund would be unable to cover Medicaid increases on its own. Any Medicaid shortfall would have to be made up by extra taxes, a higher federal match, cuts to services or a combination of those options.

· 988,678 people were eligible for Medicaid benefits in fiscal year 2006. – PR 11/28/07

· Alabama Medicaid Commissioner Carol Hermann-Steckel backed away from an earlier estimate that Medicaid needs $199 million to maintain services in the state through 2009, saying the agency is still trying to calculate the figure. Legislators criticized the commissioner for not having an estimate of the agency's needs Hermann-Steckel said the agency is in negotiations with the federal government over funding. The commissioner and the committee members both agreed that the state has one of the more limited programs in the nation in terms of services offered to recipients. – PR 11/1/07

AllKids / SCHIP

· All Kids is the Alabama version of SCHIP – Children’s Health Insurance Program. The program covered more than 68,000 children in 2007. In Alabama, the federal government picks up about 78 percent of the program's cost. Alabama does not include adults in the program.

· A recent study by Families USA, a Washington, D.C., advocacy group in favor of widening the program, estimated that 107,000 Alabama children still lack insurance. – PR 9/22/07

· Alabama has never spent all of its SCHIP funding. According to the Alabama Medicaid office, there are between 12,000 and 15,000 eligible children who are not enrolled. – PR 11/18/07

PEEHIP

· The Public Education Employees Health Insurance Plan (PEEHIP) covers about 220,000 people, including current workers, retirees and dependents. PEEHIP covered 45,642 retirees on their hospital and medical plan.

· There are $20 billion in expected retiree health care costs for state employees and educators over the next 30 years.

· The $417 million already in a trust fund for education employees won't cover 5 percent of future retirees' costs. The creation of educators’ fund and another for other state employees earlier this year already has knocked off $2.1 billion from the cost for education employees.

· Voters in June 2007 approved establishing two trust funds for retirees, one for educators and another for other state employees. The creation of the funds, along with the state putting $417 million into the education fund, reduced the state's education liability from $14.5 billion to $12.5 billion. The reduction comes out of the money put into the fund and expected investment returns over the next 30 years. $50 million was placed in the new fund to cover other retired state employees.

· States are required to detail their unfunded health care liability under new accounting rules adopted by the Governmental Accounting Standards Board in 2004. The panel's ratings play a significant role in determining a state's bond rating, as well as its ability to borrow for projects such as a $1 billion school bond issue approved by the Legislature earlier this year. The state will start selling the bonds in December, and rating agencies are scheduled to meet with state officials later this week. Bronner said the liability reduction would help the state find buyers.

Alabama Medical Laws and Regulations

PAs/CNRPs

· For a surgical specialty no more than two PAs per physician are allowed.

· If the mid-level practitioner will work at a site away from that of the physician (“remote site”), an application for each such site must be made and approved.

· Remote site rules apply to a physician’s primary practice location when the physician is not present and the mid-level practitioner is seeing patients.

· A CRNP or a PA may not write prescriptions for controlled substances.

· When the collaborative practice with a CRNP or the registered practice with a PA is terminated for any reason, the Board of Nursing must be notified promptly about the CRNP and the Board of Medical Examiners about the PA and physician.

· To establish a collaborative practice, the CRNP must apply to the Nursing Board and the physician must notify the Board of Medical Examiners (BME) that a collaborative agreement is contemplated. Initial and temporary approval is granted by the ABN. Final approval for the collaborative practice is granted by the Joint Committee.

· Refer to 540-X-8-.08, Requirements for Collaborative Practice by Physicians and Certified Registered Nurse Practitioners, and 540-X-7 Assistants to Physicians, accessible through the Newsletter Links section at www.albme.org

· The Board of Medical Examiners has established a set of procedures that a qualified PA can perform. In certain instances, a physician may request that a registered PA be allowed to develop certain skills beyond the basic ones learned in PA training. Upon approval by the BME, the PA may study and train in these skills and, when the PA demonstrates competence to the satisfaction of the BME, the privileges are extended.

Alabama Health Care Law

· Alabama uses a national (as opposed to statewide or community) standard of care – Ala Code §6-5-548 (2005)

Tort Reform

· Alabama did enact a cap of $400,000 in 1987, but the state Supreme Court struck down the limit shortly after, saying it was unconstitutional.

· According to a 2003 study by the Insurance Department, the latest one available, plaintiffs were successful in 37 percent of medical liability cases in 2002 and the total awards of all 54 trials that year was $30.6 million.

· The insurance study noted that Alabama's courts and Legislature revised the rules on expert witnesses in medical liability cases to limit the circumstances in which a plaintiff may go before a jury, which has resulted in fewer medical liability cases being filed in Alabama.

Alabama Medical Economics

· To be covered by even limited Medicaid programs in Alabama, one of the lowest-paying states in the country, a couple can earn no more than about $15,000 a year -- roughly the federal poverty level.

· Federal government grants to cover the Medicare and Medicaid services in 2001 totaled $2.1 billion; 695,195 enrollees received Medicare benefits that year.

· At least 13.1% of Alabama's adult population was uninsured in 2002.

· Health care costs in Alabama grew an average of 6.4 percent a year between 1991 and 2004, slightly below the national average of 6.7 percent, according to the Kaiser Family Foundation's State Health Facts Web site (www.statehealthfacts.org). – PR 10/30/07

Hospitals

· Alabama had 107 community hospitals in 2001; there were 16,627 beds and 684,923 admissions.

· Hospital personnel included 17,216 registered nurses. Alabama had 218 physicians per 100,000 population in 2000.

· The average per capita expense to hospitals in the state for care in 2001 was $1,269.

· The Alabama Hospital Association has estimated that the 1997 Balanced Budget Act, which forced billions of dollars in Medicare cuts, has wreaked havoc with hospitals in the state. More than two-thirds of the state's 115 hospitals have operated in the red over the last few years, the association reports.

· Federal tax records show that some nonprofit hospitals in the state are indeed hemorrhaging red ink. Baptist Medical Centers in Montgomery, for example, where the low-income patient level is about double that of Mobile's private hospitals, reported a $29 million loss in fiscal 1999, tax returns show.

Alabama Health Insurers

· Blue Cross/Blue Shield of Alabama

· HealthSpring currently owns and operates Medicare Advantage plans in Alabama, Florida, Illinois, Mississippi, Tennessee and Texas and also offers a national stand-alone Medicare prescription drug plan. HealthSpring is based in Nashville. In 2000, Healthspring purchased a sinking Nashville, Tenn.-based HMO owned by Baptist Health System and immediately began to right the ship. In 2002, Healthspring acquired Alabama HMO The Oath.

Other Alabama Healthcare Companies

HealthSouth

· HealthSouth Corporation (HLS) operates 95 inpatient rehabilitation hospitals, 15 long-term acute care hospitals, 80 outpatient rehabilitation satellites facilities and 12 home health agencies.

· HealthSouth was involved in a corporate accounting scandal in which its Chief Executive Officer, Richard M. Scrushy, was accused of directing company employees to falsely report grossly exaggerated company earnings in order to meet stockholder expectations.

· At the company's height, it recorded nearly $4.4 billion in revenue, dominated the rehabilitation services market and employed more than 50,000 people at 2,000 facilities in every state of the U.S. along with its facilities in the United Kingdom, Canada, Australia, Puerto Rico and Saudi Arabia.

· By 2006 HealthSouth completed its recovery and relisted its stock on the New York Stock Exchange under the symbol HLS. The company currently operates one division: inpatient rehabilitation. The company formerly operated an outpatient rehabilitation, surgery center and diagnostics division.

· HealthSouth was incorporated in 1984 as Amcare Inc. by its founder Richard M. Scrushy. The company opened its first facility in Little Rock, Arkansas and one in Birmingham later that year. In 1985 the company changed its name to HealthSouth Rehabilitation Corporation. In 1986 the company went public with its IPO on the NASDAQ Stock Exchange under the ticker symbol HSRC. At the end of the company's last investor roadshow in New York City before its IPO, Scrushy received a standing ovation from the investment bankers in attendance, an extreme rarity. In 1988 the company moved to the New York Stock Exchange and became listed under the symbol HRC. By 1990 the company had expanded to 50 facilities across the US. HealthSouth finished out 1992 with $400 million in annual revenue. In 1993 the company made its first large acquisition when it bought 28 hospitals and 45 outpatient rehabilitation facilities from National Medical Enterprise for around $300 million in cash. In 1994 HealthSouth announced it would buy fellow Birmingham based ReLife for $180 million in stock.

· Throughout the mid-1990s, HealthSouth expanded rapidly through mergers and aquistions. In 1995 the company changed its name to HealthSouth Corporation. In 1995 HealthSouth announced that it was going to build a new headquarters on US Highway 280 in Birmingham.

· In 1995 the company entered the surgery center business with its $155 million acquisition of Surgical Health Corporation. One month later the company acquired Novacare's entire rehabilitational hospital business for $215 million in cash. In 1996 the company expanded into diagnostics with its purchase of Health Images Inc. HealthSouth made its largest acquisition yet when it purchased Horizon/CMS for $1.8 billion. After the acquisition, HealthSouth sold the assets it did not need to Integrated Health for $1.15 billion in cash. HealthSouth continued on its acquisition spree through 1999 by purchasing the majority of Columbia/HCA's surgical division.

· In 2001 the company announced it would, along with Oracle Corporation, build the worlds first all digital hospital on its corporate campus. The 13 story structure was meant as a replacement for its aging Medical Center in downtown Birmingham.

· The first of HealthSouth's accounting problems surfaced in late 2002 after Richard Scrushy sold $75 million in stock several days before the company posted a large loss. The SEC announced it was investigating Scrushy. In 2003, FBI agents executed search warrants at the company's headquarters after the company's Chief Financial Officer William Owens agreed to wear a wire in a failed attempt to get Scrushy to talk about the fraud.

· In 2003, HealthSouth and Scrushy were accused by the SEC inflating earnings by $1.4 billion. In 1996, Scrushy allegedly instructed the company's senior officers and accountants to falsify company earnings reports in order to meet investor expectations and control the price of the company's stock. In certain fiscal years, the company's income was overstated by as much as 4700 percent. The $1.4 billion represents more than 10 percent of the company's total assets.

· In June of 2005, Scrushy was acquitted on all 36 of the accounting fraud counts against him, most notably one count in violation of the Sarbanes-Oxley Act. But in June 2006, he was convicted on bribery charges, having stood accused of arranging $500,000 in campaign donations in exchange for a seat on a state hospital regulatory board.

· Following the raid at the company's corporate headquarters, the board of directors held an emergency meeting to terminate Scrushy as Chairman and CEO, and Bill Owens as CFO. Another issue was how it was going to come up with the cash for interest payments of senior bonds and principal payments due on a $344 million convertible bond. At the advice of its lender JPMorgan Chase, the company hired restructuring firm Alvarez & Marsal to bring its finances in order and immediately appointed Bryan Marsal Chief Restructuring Officer. By the end of 2003, the company had most of its finance back in order and was able to avoid Chapter 11 bankruptcy.

· Efforts were made at the corporate headquarters to remove the memory of Scrushy. The board removed Scrushy's name from the conference center, closed the company store and museum and opened the fifth floor executive offices to all employees, which under Scrushy, were kept away. The board also sold all but a few of the company's 11 corporate jets. The company halted construction of its Digital Hospital, for which building costs had doubled to $400 million. Jay Grinney was chosen by the board as the company's permanent CEO. Soon after the company restated earnings from 2000 to 2003. The company also sold or closed many underperforming facilities including its medical center division in its effort to return to profitabiity.

· In August 2006, the company unveiled its restructuring plan which included the sell, spin-off or other disposition of its surgery, outpatient, and diagnostic divisions along with a 1-for-5 reverse stock split to coincide with its relisting on the New York Stock Exchange under the symbol HLS.

· In 2007 the company sold its more than 600 outpatient centers to Select Medical Corporation for $245 million in cash.

· HealthSouth sold its surgery center division to private investment partnership TPG Capital for $920 million in cash and $30 million dollars equity interest in the newly-formed company Surgical Care Affiliates. The surgery center division is comprised of 139 outpatient surgery centers and three surgical hospitals. The new surgery center company is headquartered in Birmingham.

· HealthSouth sold its diagnostic division to the Gores Group for $47.5 million dollars. The newly formed company Diagnostic Health Corporation will remain in Birmingham.

· Offspring companies: MedPartners Inc. — a physician practice management company founded by Scrushy, today the company is known as Caremark Rx; Capstone Capital Corp. — a real estate investment trust founded by Scrushy; Diagnostic Health Corporation — former diagnostic imaging division; SourceMedical Solutions — healthcare technology systems founded by HealthSouth; Surgical Care Affiliates, Inc. — former surgery center division

· Previously affiliated companies: GG Enterprises (Hoover, Alabama) — founded by Scrushy's mother and brother; 21st Century Health Ventures (Birmingham) — founded by Scrushy and former HealthSouth CEO Michael Martin; MedCenterDirect.com (Atlanta) — HealthSouth bought 6.4 million shares of this hospital supplies company; Integrated Health Services Inc. (Sparks, Maryland) — a nursing homes and rehabilitation center company that Scrushy was a director of in the 1990s; HealthTronics Surgical Services Inc. (Marietta, Georgia) — Michael Martin was director while CFO at HealthSouth

· HealthSouth corporate website

· Birmingham News Special Report on the HealthSouth Scandal

· Source: Wikipedia

Caremark Rx

· Caremark Pharmacy Services, formerly known as Caremark Rx, was founded in 1993 in Birmingham as MedPartners, Inc by HealthSouth Corporation as a physician practice management (PPM) company. After going public in 1995, MedPartners quickly became the largest PPM company through many acquisitions.

· In 1996, MedPartners acquired Caremark International, which was founded as a unit of Baxter International and was spun off from Baxter in 1992 as a publicly traded company. MedPartners absorbed Caremark's PPM division and prescription benefit management (PBM) division and disposed of Caremark's rehabilitation hospitals to HealthSouth.

· In 1998, CEO Mac Crawford announced that MedPartners was exiting its PPM business and refocusing on its PBM business. In 2000, after it had sold all of its PPM practices, MedPartners changed its name to Caremark Rx. In 2001 Scrushy sold his remaining shares in Caremark and left its board to continue as Chairman and CEO of HealthSouth.