Tight construction financing is hitting hospitals as many administrators are having trouble finding financing for big seismic retrofit projects.
The California Hospital Association surveyed hospital chief financial officers around the state and found that 64% of the executives say they won’t be able to get the financing needed to make improvements to their hospitals. California law requires that by 2013 most hospitals must be able to remain operational after a major earthquake.
Under current law, the state could force hospitals that aren’t in compliance by 2013—or 2015 if they’ve received an extension—to not take patients.
The association estimated that a third of the state’s 2,700 hospital structures could close and that the total bill for retrofitting could cost hospitals $110 billion.
Revisiting the current seismic timelines “is essential,” said C. Duane Dauner, the association’s chief executive.
About 30% of the chief financial officers said that they had seen their expenses increase during the first quarter, while the association said that other hospitals had been frozen out of the borrowing market entirely.
The group also noted that hospitals are facing more revenue pressure because of what it called a “significant increase” in uninsured patients going to emergency rooms for healthcare. The survey showed that 57% of hospitals statewide saw more people without health insurance in the first quarter.
From time to time, the hospital association has raised concerns about the cost of earthquake retrofitting.
In 2005, the state Senate passed a law supported by the association that modified the seismic requirements so that all hospitals, except those most in danger of being destroyed in an earthquake, could have an extension to have renovations completed.
ICU Medical’s Conservative R&D
A few weeks ago, I wrote about how some medical device makers were likely to tamp down research and development spending in the wake of the economic slowdown.
ICU Medical Inc. in San Clemente is doing just that. In the second quarter, the maker of intravenous connectors and other devices designed to protect healthcare workers from injury spent only $677,000, or 1.1% of its revenue, on research and development.
Device makers historically spend a high-single-digit or low-double-digit percentage of their revenue on research and development. Masimo Corp., an Irvine maker of patient monitors, spent roughly 8% of its 2008 revenue of $307.1 million on research and development.
ICU’s research and development department is relatively lean—Chief Executive George Lopez said it’s made up of himself, an engineer and a few support staffers.
“We don’t waste a lot of money on products that don’t work,” Lopez said. “It’s very focused, narrow R&D. A typical CEO with an MBA who comes from another field, from Kleenex or something, really doesn’t know what’s going to sell and what’s not going to sell.”
ICU stopped research and development on a diagnostic device for coronary artery disease during the second quarter.
“If the product would have worked, it would have been a $3 billion to $4 billion product. We spent millions of dollars on it—but we should not have because (it was) away from our core business. It had potential, so we had to play it out,” Lopez said.
ICU also has new products in the works, including one that Lopez said would be a “game changer” that’s scheduled to be introduced in the current quarter.
Bits and Pieces:
Irvine drug developer Cortex Pharmaceuticals Inc. said it received $2 million in a convertible private investment in a public equity deal from an unnamed single institutional investor. Cortex, which is working on treatments for sleep apnea, said it would use the money for working capital and general corporate purposes … B. Braun Medical Inc., a Pennsylvania-based medical device maker with a large OC presence, said it would sell its safety intravenous catheters through Amerinet Inc., a St. Louis-based hospital buying group … EDI Health Group Inc., an Irvine-based dental care information technology company, said it added 25 companies to its payer partner base during the first half of the year. Its new clients include the dental HMO and PPO business of UnitedHealth Group Inc.’s PacifiCare, which has a major base in Cypress … United Pet Care, an Arizona-based company that provides veterinary care service discounts for its members, opened a California office in Irvine. United said that it is offering its services through various local employers as a voluntary benefit.
