LOS ANGELES — The California Debt and Investment Advisory Commission is conducting a broad analysis into how conduit borrowers, including nonprofit hospitals, disclose information about significant events.
CDIAC, an arm of the State Treasurer's Office, began the study after Service Employees International Union-United Healthcare Workers West raised concerns in a Feb. 18 letter that nonprofit hospitals were not including enough information in bond disclosures about the impact of the Affordable Care Act.
Conduit bond issuers have participated in the issuance of $18.7 billion for hospital and healthcare facilities in California from Jan. 1, 2009 through Sept. 30, 2014, according to data provided by CDIAC.
The union, which represents 150,000 healthcare workers including many at nonprofit hospital chains, requested that CDIAC undertake a study about municipal bond disclosures related to the impact of federal and state healthcare reform on public and non-profit health systems, according to a letter from Dan Regan, president of SEIU-UHW, addressed to the state treasurer and CDIAC chair, Bill Lockyer.
"Almost all disclosures fail to provide any specific analysis as to how reform will impact the particular borrower, or identify steps the health system is taking to prepare," Regan said. "Continuing disclosures are especially variable in quality and quantity."
A spokeswoman for the California Hospital Association said the association disagrees with the union's assertions.
"Hospitals have to put together detailed analysis of what they think their finances will be - and that includes the impact of ACA," said Jan Emerson-Shea, CHA's vice president of external affairs.
Many of the impacts of ACA are already known, said Emerson-Shea, who then named several impacts that hospitals have been evaluating.
Nationally, hospitals are anticipating $23 billion in cuts to Medicare payments as a result of ACA, the debt ceiling and sequestration, Emerson-Shea said.
"Every hospital is going to include their best estimate about how that impacts them individually," Emerson-Shea said.
"We just don't agree with the assertion made by SEIU at all," Emerson-Shea said. "Hospitals are doing the best they can to provide the best financial analysis when they provide financial documents, including those for bond funding."
CDIAC, which tracks and analyzes the state's bond issuance and provides educational seminars, decided to expand its analysis beyond that of healthcare borrowers and include all conduit borrowers in the state, according to Tom Dresslar, a spokesman in Lockyer's office.
The state agency is looking at offering statements and U.S. Security and Exchange Commission rules in a review of disclosure practices related to significant events of all of its conduit borrowers, not just healthcare-related, Dresslar said.
"The initial step will portray the lay of the land," Dresslar said. "The extent to which that analysis spurs the development of a best practices guideline hasn't been determined at this point."
Dresslar added that it would be wrong to assume that CDIAC's efforts "signal any level of agreement regarding disclosure problems in the nonprofit sector."
CDIAC has not set a timeline as to when the study might be completed, Dresslar said.
In his letter, Regan asked that CDIAC develop best practices guidelines aimed at nonprofit hospitals and health facilities. He emphasized that disclosure should include not just information about legislative and regulatory developments, but specific analysis backed by quantitative data and steps taken by the borrower to deal with challenges represented by those changes.
In addition to ACA, Regan said there are a variety of state legislative initiatives involving everything from malpractice to fair pricing to executive compensation limits that could also have an impact.
It is widely recognized that health care reform will transform the industry, said Regan adding that health systems will be required to alter their business strategies and analysts expect a wave of mergers and acquisitions.
He added that SEIU-UHW's take on the situation is that "the impact will vary: "While some hospitals will thrive, some are poorly positioned to weather these transformations, and may suffer severe financial downturns and even bankruptcy."