Some Small Businesses in Fear after Election

story first appeared in The Wall Street Journal

The results of the presidential election dampened the spirits of many small-business owners who now worry that forthcoming federal policies, including potentially higher taxes and health-care reform, could stunt growth and hiring at their firms.

A November survey from Vistage International Inc. and The Wall Street Journal found a significant drop in optimism compared with the months leading up to the election, as respondents anticipated a worsening economy in 2013.

Julie Sanderson, owner of Vail Condo Rentals, a small business operating with a tight budget, says her main concern is health insurance. She believes that with rates already "sky high," she will be unable to keep her employees if her business costs go up.

The survey's overall confidence index, based on responses of 740 small-business owners, fell to 83.9 from 95.3 in October. That is the lowest in the survey's six-month history.

Specifically, the survey's index of expected economic conditions fell to 77 from 105, a result of 43% of the respondents anticipating worse U.S. conditions in the next 12 months. That is nearly twice as many as October's 23%. The index of business profits also fell to 122 from 135 as only 43% of owners anticipate higher profits in the coming year, down from 50% last month.

Some policies that Mitt Romney had proposed during his campaign were appealing to small-business owners, such as keeping taxes low and repealing President Barack Obama's health-care reform.

Anticipating higher taxes under President Obama, more business owners are preparing cutbacks to their payroll and other overhead expenses. November's employment index fell to 124 from 141 as 16% of owners are planning to reduce staff in the next year, up from 9% in October. And the fixed-investment index fell to 107 from 123, in part because 23% of owners plan to decrease their investment expenditures, up from 14% last month.

Terry Racciato, one business owner, said she was despondent in the days following the election. Ms. Racciato is president of Together We Grow Inc., a pediatric health day-care business for special-needs children in San Diego that she started in 1990.

The top issue for Ms. Racciato is rising health-care costs. She provides benefits to her 52 full-time employees and personally gets coverage through her company's plan. Because she and her husband are now over the age of 60, their deductible and copayment for medical care recently doubled to $37,000 annually. That is money she could have used to bring on another employee, she said.

What's deepening her worry, she said, is that if she opts to drop health benefits to save money, she will, in 2014, have to pay a penalty—a provision that kicks in for companies with 50 or more full-time employees under the federal health-care reform.

She reiterates the fears of Mrs. Sanderson, who fears both her Vail business and her Deer Valley Condo Rentals will be in jeopardy because they operate at low costs. She says keeping vacation rental costs low for her customers is her greatest value, but isn't sure how she'll be able to keep up if her health care costs increase.

Ed Trevis, president and chief executive of Corvalent Corp., an industrial-computer manufacturer in Cedar Park, Texas, says the uncertainty about potential tax hikes is hurting his 50-person firm because he can't plan for the future.

A tax increase on higher-income earners may come as part of an agreement to avoid the so-called fiscal cliff—a series of across-the-board tax hikes and government-spending cuts that will kick in at the beginning of 2013. But Congress has yet to come to a resolution and Mr. Trevis is nervous that any agreement could come down to the last minute and be only temporary.

Global economic conditions are most troubling to William P. Southard, founder and president of DST Controls in Benicia, Calif. Mr. Southard and his 38 employees set up and service computer systems and monitoring panels on five continents.  

Opinions are Anticipated in Court Ruling

Story first appeared in USA Today.

Tea Party and union members, liberals and conservatives, Republicans and Democrats have two things in common as the Supreme Court prepares to announce its verdict on President Obama's health care law Thursday.

They have no clue what the court will decide. And they will have plenty to say outside the court immediately after — in high praise or denunciation.

Much like the court's three days of oral arguments on the Affordable Care Act in late March, Thursday will feature a crowded, hushed courtroom and a cacophonous series of sidewalk demonstrations.

For some lawyers and lawmakers who have fought the health care battle for years — and in some cases, decades — it's an opportunity to witness history inside the marble courthouse.

There's an atmosphere of intense, quiet excitement. People are sitting in that room knowing history is about to be made.

The executive director of the health consumer group Families USA, has been there the past three days the court delivered opinions, just in case health care was among them. Thursday, he plans to arrive several hours early to make sure he picks up every nuance from the nine justices.

His allies will be outside as well, to react before dozens of TV cameras. Within minutes, the group plans to send its analysis and recommendations for further action to more than 100,000 supporters. It has prepared eight news releases based on potential court rulings.

On the other side of the debate, Tea Party demonstrators also will be out in force. They plan a "flash rally" in front of the court, thanks to "Minutemen" coming from hours away.

Within 36 hours, the Tea Party Patriots plan a teleconference for their members with key opponents of the law.

Members of Congress will be inside and outside. The House Speaker will dispatch two members of his leadership team. The Speaker has vowed to seek repeal of any portions of the law left standing by the court.

Liberal Democrats, anticipating that the court's conservative majority may strike at least part of the law, plan to march from the Capitol to the court with signs urging "Medicare for all," a type of government-run health care. The option of Drug Savings Cards are also a hot topic.

Some of the most prominent advocates involved with the case won't attend — they'll be busy reading and responding.

A Georgetown University law professor and plaintiff in the case on behalf of the National Federation of Independent Business, will be reading the justices' opinions, writing on legal blog sites, doing radio commentary and fielding a steady stream of media calls.

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The Great Banana Challenge

The Wall Street Journal

How to Dispense Healthy Snacks From A Vending Machine: Design a Fruit Elevator

 

 

The big push for vending machines to sell healthier snacks has overlooked something: It isn't easy for a machine to deliver an unbruised banana.

The Wittern Group Inc., one of the biggest makers of vending machines, and fruit and vegetable marketer Fresh Del Monte Produce Inc. say they are tackling this problem with a new machine specifically designed to dispense whole bananas and fresh-cut fruits and vegetables.

At Wittern's headquarters in a suburb of Des Moines, refrigeration engineer Jerry Parle shows off the new device, its red and orange exterior festooned with Del Monte logos and pictures of whole pineapples and other fruit. The machine—which went on the market earlier this year—has two temperature zones. The top is loaded with bananas kept at about 57 degrees. The bottom zone—kept at about 34 degrees—holds packages of fresh-cut fruit and vegetables. Wittern says having the two zones helps more than double the shelf-life of bananas, from two or three days to five days or a week.

"This is a total new era for vending," said Mr. Parle. "Getting rid of the stigma of junk food in vending machines is a good thing."

New school regulations and workplace initiatives are targeting vending machines amid larger efforts to combat obesity and reduce health-care costs and absenteeism.

But dispensing fresh produce comes with a particular set of challenges. Fruits and vegetables spoil a lot more quickly than a bag of pretzels. They cost more to stock and carry a higher price tag. Getting the temperature right is tricky, too: Bananas need to be stored at a higher temperature than cantaloupe to stay fresh. And then there's the bruising issue: A banana can easily get squished from the 4-foot fall from a machine's top shelf.

Wittern engineers designed the machine to maintain two temperature zones by tightly controlling air flow. A fan near the refrigerating system at the bottom of the machine blows cold air into a duct at the back. The cold air gets pushed up until it reaches a padded sheet in the middle of the machine, which guides it into the bottom compartment. To keep the top compartment warmer, a heated foil beneath one of the trays turns on every so often. If the temperature of either compartment drops below their ideal settings for more than 15 minutes, the machine will lock itself, preventing more sales. The new machine—which is already in some schools—sells for more than $5,000 compared to about $3,000 for a typical machine.

Del Monte also developed a special packaging for bananas that keeps them fresher longer. Plastic loosely encases the banana, which is relatively green at first, and helps control the mix of gases in its atmosphere that drives ripening.

To handle the issue of bananas bruised in their tumble to the bottom, Del Monte managers asked that the retrieval bin include a padded lining and angled side walls. The next generation of fresh-produce machines—likely available for sale early next year—will eliminate banana free-falls altogether. Wittern engineers have developed an elevator tray that retrieves products from their spirals and gently deposits them in the bin.

Fresh fruit and vegetable vending machines are only a tiny fraction of sales at closely-held Wittern. The vast majority of the machines the company makes dispense soda, chips and other more traditional vending-machine snacks.

Vending machine operators are also experimenting with selling fresh fruits and vegetables in their regular refrigerated machines in the hopes that the move will boost sales. Last month, the country's largest vending-machine wholesaler, Vistar, a unit of Performance Food Group, said it would begin distributing fresh produce to its customers, thousands of mostly smaller vending-machine operators. (Refrigerated machines often sell items like burritos, sandwiches, yogurt, and frozen pizzas. Snack foods like chips and candy are usually sold in non-refrigerated machines.)

High unemployment and thrifty consumers combined to push down sales of food and beverages from vending machines 10% to $19.85 billion in 2009 from $22.05 billion in 2008, according to the trade magazine Automatic Merchandiser.

But even if vending machine companies have ironed out the technical issues involved in selling fruits and vegetables, they can have a hard time convincing people to buy the healthy stuff. In 2007, Spencer Cox, president of Vending Services Inc., started stocking a box of carrots, celery sticks and broccoli (with a tub of light ranch dressing) in the refrigerated machine at a telecommunications company. The human resources manager had requested it. Mr. Cox also replaced doughnuts and some other junk foods in another machine with 100-calorie packs of Oreo cookies and Chips Ahoy cookie crisps, Rold Gold pretzels and Wheat Thins crackers.

"It went over like a turd in a punch bowl," says Mr. Cox, whose company has about 450 vending machines in the Des Moines area. About 80% of the new products went unsold and had to be thrown away. "The truth is, people ask for this, but just because they ask for this doesn't mean they're going to buy it."

Today, he's removed the vegetable package from the vending machine and replaced it with a cheeseburger: the Landshire Big Daddy Charbroil Cheese. Now Mr. Cox will only stock healthier fare if the client has a marketing campaign or wellness initiative to support it.

In the break room of one such client, an insurance company near Des Moines, Mr. Cox placed a transparent sticker on the front of the vending machine that prods customers to "eat right" and "be healthy." Each week or so, his route driver also drops off brochures with tips on how to "be a smart snacker."

On a recent Thursday afternoon, dozens of people passed the machine. Many stopped to buy packages of doughnuts or candy, but no one selected any of the trays of pineapple chunks and grapes or celery, broccoli and carrot sticks that Mr. Cox sells in the machine for $2.50 each.

Josie Wetzler, a graphic designer, picked up a package of M&M's for 90 cents. Since she participates in the Weight Watchers diet program, she says she usually avoids the vending machine and its temptations, except for one day a week.

"I eat healthy every day except for Thursdays. Today's my free day," she said. She had not even noticed the fruit and vegetable trays until that day, and said they caused her "internal guilt" to kick in.

Nicole Quidort, a bank specialist, purchased a six-pack of powdered doughnuts and a cherry-flavored Coke. "Honestly, I just don't eat a lot of fruits and vegetables. I just don't crave them," she said. She says she doesn't worry about her health because her three young children keep her active at home.

Despite the apparent lack of interest in the fresh produce employees displayed that afternoon, Mr. Cox says he typically sells 10 of the 12 packages of fresh fruit and vegetables stocked in that machine each week.

Nestlé to Expand Business in Health Care Nutrition

NY Times

 

Nestlé said on Monday that it planned to invest more than $500 million over the next decade to develop health and wellness products to help prevent and treat major ailments like diabetes and obesity.

Nestlé will create a wholly owned subsidiary, Nestlé Health Science, as well as a research body, the Nestlé Institute of Health Sciences, “to pioneer a new industry between food and pharma,” the company said in a statement.

The company, which is based in Vevey, Switzerland, said the initiatives would seek to develop nutritional products for diseases like diabetes, obesity, cardiovascular disease and Alzheimer’s, which are placing an increasing burden on governments at a time when budgets are being squeezed.

“It is our strong conviction that disease prevention will have to play a much bigger role” in future health spending, Nestlé’s chairman, Peter Brabeck-Letmathe, told a news conference in Lausanne.

According to the World Health Organization, more than 220 million people worldwide suffer from diabetes and about 18 million people have Alzheimer’s. By 2030, almost 23.6 million people are expected to die from cardiovascular diseases, the leading cause of deaths worldwide.

The company said it planned to invest about 500 million Swiss francs ($509 million) over the next decade in the new areas.

The new business unit will be “run at arm’s length” from the main food, beverage and nutrition activities, Nestlé said, and it will incorporate the existing Nestlé HealthCare Nutrition business, which had sales of about $1.6 billion in 2009.

Analysts said the path appeared to be relatively clear for Nestlé, which would be able to extend its existing strengths in research and distribution.

Nestlé will be competing in part with pharmaceutical companies like Abbott Laboratories, which makes nutritional supplement drinks, as well as diversified groups like Unilever, which owns the weight management brand Slim-Fast.

“Nestlé is tackling a new industry,” said Jean-Philippe Bertschy, an analyst at Bank Vontobel in Zurich. “It’s quite hard to define what the market for this will be.”

But he said that Nestlé had the money to expand without requiring a return on investment for some time. Nestlé should be almost debt-free by the end of the year, he said, in part because it received $28.3 billion from the pharmaceutical company Novartis last month for a majority stake in the Alcon eye care division.

The new focus is unlikely to dent Nestlé’s status as the “clear leader in the food sector,” Mr. Bertschy added.

Nestlé has 280,000 employees and brands that include Kit Kat chocolate bars and San Pellegrino bottled water. Its annual sales of about nearly $102 billion are more than double its nearest competitor, Kraft of the United States. Other global competitors in food include Danone of France.

Nestlé declined to provide any more specific targets for its new venture, but Luis Cantarell, who will head the new unit, described it as “an opportunity that is more in billions than millions.”

PrecewaterhouseCoopers: Health Care Costs to Rise 9% in 2011

Phoenix Business Journal

Health care cost growth is expected to slow in 2011, though costs are still expected to rise 9 percent, according to PricewaterhouseCoopers Health Research Institute.

The accounting firm surveyed more than 700 employers and interviewed health plan actuaries and California healh insurance quotes to determine the expected rate of increase for 2011.

The survey showed health care costs are expected to grow 9 percent in 2011, down from the 9.5 percent growth rate in the 2010 report. At the same time, the majority of health insurance deductibles will be $400 or more for the first time.

Factors that are driving costs are the shifting of Medicare costs on insured patients, implementation of electronic medical records and consolidation among medical providers to those with national and Michigan health insurance plans.

The federal government continues to cut reimbursement rates for Medicare services, forcing health care providers to raise costs for insured patients to make up for the payment gaps.

While electronic medical records are intended to reduce costs, the upfront installation and implementation costs are likely to boost health care costs in the short run.

And consolidation among hospitals and physician groups is boosting their bargaining power, giving them better reimbursement rates from New York health insurance providers and providers accross the U.S.. Such higher reimbursements result in larger premiums.

A separate report indicates that health care costs are higher in Arizona than they are nationally.

UAW Sues GM over Retiree Health Care Payment

 

DETROIT (AP) - The United Auto Workers union has sued General Motors Corp., saying the automaker owes it $450 million for retiree health care.

In the lawsuit filed Tuesday in federal court in Detroit, the UAW said that in 2007, GM agreed to pay $450 million to settle a UAW claim against auto supplier Delphi Corp. as part of Delphi's emergence from bankruptcy protection. Delphi is GM's former parts division.

The UAW said the agreement should still be in effect even though GM went through its own bankruptcy reorganization last year. The UAW said it demanded the payment from GM on Oct. 29.

According to court documents, GM responded with a letter rejecting the union's demand.

The UAW says the money should go to a union-run retiree health care fund.

AT and T Setting Sights On 'Telehealth' Industry

from NJ.com

The doctor will see you now. Or at least in the few seconds it takes AT&T to relay your vital signs over its broadband network.

The telecommunications giant has big plans to establish a foothold in the "telehealth" industry, an emerging field that links patients and physicians across the country via video and medical-information technology.

"These days, everybody is talking about medical care: Who gets it? Who pays for it? Who decides?" said Robert Miller, executive director of technical research at AT&T and a 40-year veteran at the company’s Florham Park research labs. "But few people are working on a technology solution that would lower costs and make medical care better at the same time."

AT&T scientists have spent the past year working on prototypes of products aimed at the home health care market. The idea is to make everyday household items "part of the network cloud," said Miller, holding up a pair of fuzzy bedroom slippers. They look perfectly ordinary, but they are actually one of many telehealth products in the pipeline at AT&T.

Called "smart slippers," they have pressure sensors embedded in their soles to transmit foot movement data over AT&T’s network. If something is amiss in an elderly patient’s gait, the device will alert a doctor via e-mail or text message, possibly preventing a fall and a costly trip to the emergency room, Miller said.

Such products would represent the next step in what is called "remote medical care." Sales in that sector and other telehealth services are expected to exceed $1.8 billion by 2013, up from just $77 million in 1995, according to a PricewaterhouseCoopers report.

With that much money at stake, AT&T, Verizon and medical device manufacturers such as Cisco are aggressively entering the rapidly developing market. But analysts say they must first convince all health care players — insurers, employers, doctors and patients — to get on board.

One the biggest roadblocks to growth could be limited reimbursement from Medicare and the general fee-for-service health care system, said Zachary Bujnoch, an analyst at the research firm Frost & Sullivan.

Representatives from AT&T’s business unit said it is too early to disclose the cost of upcoming telehealth products and services, but Bujnoch said costs can run up to $100 per month, per patient.

"This is virgin territory in the health care industry when you ask how we are going to pay for it," he said, adding that telehealth’s current market penetration is in the single digits. "Everyone is groping blindly in the dark to figure out what business models are going to work."

But telehealth’s potential is enormous, Bujnoch said, especially as large firms like AT&T invest heavily in research and development. Last spring, Intel and General Electric Healthcare announced they would jointly commit $250 million to develop wireless products to connect patients to physicians. And Verizon announced last month it has partnered with Cisco to deliver an audio and video consultation service that lets doctors interact with patients in real time.

Telehealth’s biggest advantage, proponents say, is its tremendous cost-saving potential. Remote patient monitoring alone can generate between 20 percent to 40 percent in savings, said Chris Wasden, managing director of health industry strategy and innovation at PricewaterhouseCoopers.

"Ironically, the United States is late to the party here," said Wasden, explaining that telehealth is much more common in developing countries such as India, where cell phones enable people to receive health care in remote areas that once lacked access to modern medicine. "They’ve already developed the ability to deliver mobile health care to their people, but we’re behind the times on that."

$6 BILLION INFUSION

AT&T’s push into the market comes as the Obama administration and Congress seek to overhaul the country’s health care system — partly by wiring hospitals, doctors and patients to reduce medical errors and duplication of services. As part of the effort, the federal government is putting at least $6 billion into various telehealth programs.

"The government is saying, ‘You have to go digital,'" said Tom Gregorio, chief information officer at Newark Beth Israel Medical Center, a 673-bed facility that also provides medical services to seven assisted-living centers in the Newark area.

A health care bill before the Senate would cut Medicare plans reimbursement for patients readmitted to hospitals up to 30 days after they were discharged. If the bill passes, Gregorio said he must find a way to curb the readmission rate at his hospital — or absorb the cost of those returning patients. Despite its uncertain cost structure, telehealth could be a solution, he said.

"Making sure that a patient isn’t readmitted — that alone is a positive return on investment," he said.

Despite telehealth’s potential, there are relatively few specific examples of how changes in the system might improve patient outcomes and reduce costs. At AT&T, Miller said the prototypes have not yet been thoroughly tested, though plans for a pilot program are under way.

A focus of those pilot programs should be to ensure that the technology is easy-to-use and reliable, Bujnoch said, since errors caused by remote medical monitoring devices could create unnecessary health care costs of their own.

"If it’s going to go off every three hours, who cares?" he said. "And that’s where they have to do the clinical studies and the research to prove that kind of stuff."

Maintaining a patient’s privacy is also a big concern as more telehealth products and services emerge, said Tim Keough, president of the New Jersey Health Information Management Association. At the very least, data should be encrypted as it moves across a service provider’s network, he added.

Miller said AT&T is using guidelines established under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as its standard while developing its telehealth portfolio, though the rule doesn’t specifically address telehealth services.

Gregorio said some doctors are also leery of telehealth, due to lack of solid evidence of a return on investment. But if the federal government succeeds in its push for health care reform, Gregorio said it would "create a revolution associated with physicians having to adopt technology that they have been rejecting for a very long time."

The hardest party to convince will be private insurers, said Bujnoch, whose agenda isn’t always in sync with those of providers and patients.

For example, Horizon Blue Cross Blue Shield of New Jersey, the state’s largest insurer, does not cover telehealth services, but the company said it is receptive to emerging technologies.

"I like to think we are progressive on these things," said Stan Harris, a pediatrician and senior medical director at Horizon. "But AT&T needs to show us that patients wearing those slippers had fewer accidents. We need clinical trials and other research objectives to prove the technology."

Miller is hopeful that AT&T’s products will eventually be covered by Medicare. He said proliferation of telehealth is inevitable as populations live longer and the demand for cost-efficient home care rises.

"A lot of people, including myself, never feel that we’re going to get sick, get old or need health care monitoring," said Miller. "The statistics are inescapable and eventually we will."

Senate Health Panel Readies Government Insurance Option
Story from the Mercury News

WASHINGTON — Senators on a key committee are putting the finishing touches on a government health insurance option that they hope will win broad support among Democrats and the public.

According to a draft summary circulating Tuesday, the Senate Health, Education, Labor and Pensions Committee proposal calls for a nationwide plan to be run by the federal government. An upfront loan from taxpayers would get the plan started, but it would have to pay its own way after a few months, relying on premiums collected from beneficiaries to stay solvent.

The public plan would be offered alongside private coverage through new insurance purchasing pools called exchanges. The government option would have to follow the same consumer protection rules as private plans it competes with.

The idea of government medical coverage for middle-class workers and their families has become the hottest issue in the debate over how to overhaul the health care system. President Barack Obama and most Democrats say the choice of a public plan would serve to balance the power of private insurers. But insurance companies see it as a step toward a government takeover, and many business groups agree. Polls indicate public support for a government option.

"This has the ability to unify Democrats," Ron Pollack, executive director of Families USA, said Tuesday. His organization is a liberal advocacy group that supports coverage for all.

The health committee proposal will be one of at least four major options for lawmakers to consider on a government plan after they return from their weeklong July 4th recess.

The first option is to have no public plan, maintaining the current system in which the government covers the elderly and low-income people, but most workers and their families get job-based insurance, or private coverage such as Michigan health plans. Having no public plan is the option favored by Republicans, who are almost unanimously opposed to the idea.

At the other end of the spectrum is the House Democrats' proposal. It calls for a public plan that would pay doctors and hospitals using reimbursement rates keyed to Medicare's, which medical providers say are often too low.

In an important distinction, the Senate HELP committee's plan would not use Medicare payment rates.

Instead it would set fees to doctors and hospitals using an average of what private insurers pay in each local area, according to the summary. That seemingly technical difference could help neutralize opposition from medical providers, who are wary that a public plan will translate into a significant pay cut for them. The health panel's plan also stipulates that hospitals and doctors would be free to opt in or out.

Finally, the Senate Finance Committee is trying to come up with a bipartisan compromise. Ideas include setting up nonprofit co-ops that would not be controlled by the government, and having a public plan as a fallback only if private insurers fail to bring costs down and expand coverage.

The health committee plan reflects some of the ideas outlined by Sen. Chuck Schumer, D-N.Y., a Finance Committee member. Schumer, who's unhappy with the direction of bipartisan talks on a public plan, said Tuesday he's preparing his own proposal for a vote in the Finance panel.

"We believe it is possible to devise a public plan option that exerts competitive pressure on insurers without relying on unfair, built-in advantages," Schumer said in a statement. "We are going to keep up our push to include this kind of plan in the health care reform bill."

A spokesman for Sen. Christopher Dodd, D-Conn., who's standing in for Sen. Edward Kennedy, D-Mass., at the head of the health committee, had no immediate comment.

In Spite of Everything, Health Care Stocks Perform Well
Story from San Francisco Chronicle

Health care stocks, which have been plagued by a variety of ailments in recent years, are emerging as one of the stock market's few bright spots.

Over the past three months, health care companies in the Standard & Poor's 500 are up 4.4 percent on average, compared with a drop of 7.9 percent for the overall index. The only other S&P 500 sector in positive territory is consumer staples, up 0.27 percent.

Health care and consumer staples traditionally outperform other sectors when the economy slows, under the assumption that no matter how bad things get, people will always need food, drink and medical care.

While that is undoubtedly a factor this time around, some analysts say the sector's recovery could be more than temporary.

"I'm bullish now for the short, medium and long term," says Jonathan MacQuitty, a partner in Abingworth Management Inc. in Menlo Park, which specializes in health care investing. "I'm not always short-term bullish, but I think health care will be the best performing sector for the next 12 months."

The strength in health care follows several years of underperformance, which drove many stocks to cheap or reasonable valuations.

Investors have long fretted about the ability of big pharmaceutical makers to replace blockbuster drugs losing patent protection and what would happen to drug and managed care companies if a Democratic president teamed up with a Democratic Congress and got serious about reining in medical costs.

While those fears remain, they are taking a backseat to worries about housing, energy, the financial system and geopolitics. "There is more of an emphasis on financial and energy regulation than health care reform," says Brian Belski, chief U.S. sector strategist with Merrill Lynch.

Belski believes that investors are now seeing health care stocks not so much as a defensive play but as a growth story. He says it is one of the few sectors that has delivered double-digit earnings growth over the past few quarters and is still expected to grow moderately in coming quarters.

"It's hard to beat demographic trends," he says. "The population is getting older. Biotech, life science and medical device (companies) are still at the forefront of innovation," he says.

Belski admits that health care is benefiting from people fleeing financial stocks and, more recently, energy.

The sector has also been buoyed by foreign firms with strong currencies looking to buy U.S. companies on the cheap. Since last year, overseas firms have completed or attempted takeovers of MedImmune, MGI Pharma, Millennium Pharmaceuticals, Barr Pharmaceuticals and Genentech.

Mutual funds focused on health care are up 6.84 percent over the past three months, according to Morningstar. It is the only category of stock funds - domestic or international - in positive territory during the period.

Funds with the greatest exposure to biotech companies are doing the best, says Morningstar analyst Wenly Tan.

Biotech companies in general have done a better job developing new drugs than old-line pharma companies, making them prime candidates for takeovers or distribution deals.

"Biotech companies are a lot more mature these days, they are holding onto more cash. They are not turning public as early as they used to," Belski adds.

Within the sector, Belski favors biotech, medical device and life-science companies that make manufacturing equipment. His favorites include biotech company Celgene, Johnson & Johnson, device maker Medtronic and Thermo Fisher, which makes medical equipment and chemicals.

Among S&P 500 companies, the biggest health care gainers over the past three months include generic-drug maker Barr (up almost 57 percent thanks to the takeover offer), biotech giant Amgen (up 51 percent), Varian Medical Systems (up 37 percent), Celgene (up 21 percent) and King Pharmaceuticals (up 19 percent).

Laggards include managed-care companies Coventry Health (down 22.2 percent) and UnitedHealth Group (down 16 percent); Biogen Idec (down 12 percent); Merck (down 10 percent); and Aetna (down 9 percent).

Health care heals itself

Performance of S&P 500 industry sectors

S&P sector	Last 3 months	Year to date
Health care	4.39%	-7.29%
Consumer staples	0.27	-2.73
Technology	-4.22	-11.69
Consumer discretionary	-5.51	-9.18
Utilities	-8.32	-12.51
Industrials	-8.49	-13.08
Materials	-12.34	-8.30
Telecom services	-14.02	-24.13
Energy	-14.05	-8.58
Financials	-18.56	-31.53

Source: Bloomberg

Push to Compare Treatments Worries Drug, Device Makers
Story from the Wall Street Journal


WASHINGTON -- Federal health-care agencies are getting $1.1 billion in economic-stimulus funds for research comparing the effectiveness of various treatments. But drug and medical-device makers, along with some members of Congress, say they are worried the findings will be used to limit patients' options.

President Barack Obama has emphasized that reining in health-care costs is vital to cutting the budget deficit. The administration believes research could help doctors reduce wasteful and ineffective treatments. The White House's budget blueprint envisions combining data on which treatments work best with electronic health records to deliver "user-friendly pop-up alerts for physicians at the point of care."

The National Institutes of Health has said it will consider research proposals comparing the cost-effectiveness of biologic medications, cancer treatments and preventive measures for chronic illnesses such as diabetes.

The director of the Agency for Healthcare Research and Quality, said "the overarching purpose of the program is to give clinicians and patients information they need to make decisions." That could include, she said, information on effectiveness, safety and costs.

"We don't want [the research] to be used to deny access to care," said a vice president for policy and research at the Pharmaceutical Research and Manufacturers of America.

The Vice President of the Advanced Medical Technology Association, said using "this research to deny access to appropriate treatments for individual patients with individual medical histories and individual needs should not be the objective."

The director of the White House Office of Management and Budget, told lawmakers last month that the research won't necessarily lead to coverage denials. "At the extreme, if something is shown not to be effective, it could simply not be covered," he said. But he also suggested the government could pay "more for the things that work than the things that don't."

The Centers for Medicare and Medicaid Services, the agency that manages some plans relating to Michigan Medicare Insurance, already uses AHRQ research to help decide what treatments it will cover. However, the agency isn't the one making regulations or Michigan Medicaid insurance payment decisions, nor does it recommend what treatments are best.

The stimulus law provided $400 million to NIH, $300 million to AHRQ and another $400 million to the Department of Health and Human Services, the parent agency of NIH and AHRQ, for research comparing the effectiveness of medical treatments. HHS set up an advisory group to coordinate research and distribute the money. The group will hold a meeting Tuesday to get public input on how to spend the $400 million.

Some say the government-funded research inevitably could be used to decide insurance coverage. Sen. Jon Kyl (R., Ariz.) unsuccessfully pushed a measure recently to bar federal health programs from using comparative-effectiveness research to deny coverage. His amendment got 44 votes, including those of Sens. Charles Grassley (R., Iowa) and Russ Feingold (D., Wisc.), who have played major roles in health-care legislation.

AHRQ already has turned research it funded into guidance for consumers, physicians and policy makers, some comparing costs of various treatments. A 2007 online guide on pain medications for osteoarthritis, for example, lists a variety of pain relievers and their prices, including $2 for 100 aspirins and $170 for a 30-day supply of 400-milligram Lodine.

Who Is The Doctor Here?
Story from the Detroit Free Press

More than four of five Michigan osteopathic doctors feel pressured by an insurance company or managed care plan to use a different medicine for their patients than the one they originally prescribed, a survey released today has found.

The survey of 500 doctors by the Michigan Osteopathic Association found a wide range of concerns among doctors about a practice known as therapeutic substitution. It describes how a health care plan suggests use of a less costlier drug instead of one ordered by a doctor but not covered by the plan.

Dr. Craig Magnatta, association president, recommends that consumers ask their pharmacists if they received the medicines their doctor ordered or to find out why a substitute was made. Consumers also need to ask the pharmacy to notify their doctor that the prescription was declined and to tell the patient what side effects the ordered medicine has.

A Healthy Field For Jobs
Story from the Roanoke Times

Donna Ferguson spent about a decade working in information technology before being laid off.

Now the Salem resident is looking to the health care industry for future paychecks.

Bill Potter said given the current economy he's grateful to have a job as a nurse after spending 15 years as an engineering design draftsman and several more years in a coffee shop.

And Brooke Crouch said after she graduates in May, she's counting on the needs for dental hygienists to help her secure a job during this recession.

With health care standing out as one of the few industries where jobs are being added instead of shed during the economic crisis, Ferguson, Potter and Crouch aren't the only people looking to tap into the security of health professions. Colleges in the Roanoke and New River valleys report an increase in applicants to their various programs in the health field, and some say they have noticed a surge in the number of inquiries from nontraditional students -- those not right out of high school -- looking to head back to school.

While many of the programs point to multiple reasons for the uptick in students interested in the medical field, they all agree the recession has been a contributing factor. Job seekers looking for more control in an unstable economy have led some people who are already working in the medical field to consider advanced training and graduate school to add an even greater sense of job protection.

"In every recession there are always people who come back to school or grad school to advance their skills," said Raymond Linville, dean of Radford University's Waldron College of Health and Human Services.

In particular, Linville said the college has seen tremendous interest in its new physical therapy and occupational therapy graduate programs among several other health care degrees. While the occupational therapy program is set to begin classes in the fall, the physical therapy program is on hold until a chair for the program is hired.

A growing industry

Nationwide, health care will generate 3 million new jobs between 2006 and 2016. That's more than any other industry, according to the U.S. Department of Labor. Seven of the 20 fastest-growing occupations are in health care.

Projected rates of employment growth range from 13 percent in hospitals, the largest and slowest growing industry segment, to 55 percent in the much smaller home health care services.

As talks heat up for national health care reform, the industry could be further affected as providers figure out ways to accommodate the millions of people who are now uninsured and likely not accessing health care services.

"If you get those people back on insurance and they are getting health care again, then you are going to increase the demand issues," said Beverly Beck, director of Virginia's Healthcare Workforce Data Center. "No matter what, it will make an impact."

Beck is working with a team of experts to establish work force data to help spot trends and inform the public and policymakers about the supply and demand of health care workers. The center was funded by the state in July.

"We really don't have anything like that now," she said.

While the economic crisis has not entirely spared the health care industry, it is among the few sectors that has added jobs.

In Virginia, health care jobs grew in several areas from January 2008 to January 2009, according to numbers released last month by the Virginia Employment Commission. That includes a 7.9 percent uptick in private social assistance, a 2.4 percent increase at hospitals and 3.1 percent growth at nursing and resident homes.

Locally, for instance, Carilion Clinic's ongoing transformation from a hospital-based provider to a clinic-based health care system has helped sustain job growth. The Roanoke Valley's largest employer, Carilion now employs about 12,000 people. Carilion competitor HCA Southwest Virginia also has continued to hire for clinical jobs at its four hospitals throughout the economic downturn.

It's the growth in the health care field that has Ferguson looking to make a move into the industry.

Ferguson was laid off Jan. 9, and has had no luck in finding employment in the IT industry.

"I don't have a bachelor's, so it is much harder for me to get my foot in the door," she said.

Two weeks ago she finished a Virginia Western Community College online course called introduction to medical technology. It cost $89 and helped her decide to make a career change.

"The medical field is always booming, so I decided that is the direction I want to go in," she said.

Last week she enrolled in an online certification program through the American Academy of Professional Coders.

Once certified, Ferguson plans to run her own business offering to work for physician offices to help code patient medical information for insurance purposes. She has already set up a business, F&H Administrative Services, and begun networking for clients.

With a daughter, a husband, three dogs and a "huge mortgage," Ferguson said the decision to spend $1,300 for the certification courses was something that had to happen to improve her family's financial future.

"I have to be working, and I have to be bringing in some income," she said.

Early enrollment numbers

It's people in similar positions who are helping to boost early application numbers at some area colleges. Both Virginia Western and Jefferson College of Health Sciences have seen a rise in applications for some health degrees. Numbers from Radford were not yet available, Linville said.

Still, it's too early to know the extent of the impact the recession has had on the health field. And National College in Salem hasn't seen a dramatic increase in people looking to change careers by getting trained for a job in health care, spokesman Chuck Steenburgh said.

"From our perspective the big move to health professions took place in the '90s," Steenburgh said. "We're to the point now [where] we've gone from a small percentage of the student body up to 50 percent today who are in the health care field. There may be a modest increase, but it really hasn't been anything dramatic."

Still since January, Virginia Western in Roanoke saw a significant increase in applicants to its health technologies division, especially in nursing, where applications were up 16 percent.

"We may see a much bigger increase next year because of those people in the pipeline who have not yet applied to a program," said Anne Kornegay, dean of the health technologies division.

Many people deciding to make a career switch may not have the prerequisites needed and could be obtaining those before enrolling in a specific degree program, she said.

Similarly, Jefferson College has also seen an increase in its applications compared with a year ago. Jefferson College, which has rolling admissions, has received 1,623 applications, up 7.3 percent from 1,512 the same time a year ago. The college's nursing program has seen applications increase 24 percent.

Not only is the college seeing more applications, but more applicants who have committed to attending by putting down deposits. Of the 1,623 applicants, 240 students have made a deposit, up from 189 a year ago.

"Absolutely, the economy has had an impact," said Carolyn Melby, chairwoman of nursing for Jefferson College. "We just have a lot more interest being expressed, and we have serious applicants who are making calls to find out what we have to offer. ... We've also had more inquiries from second degree people."

Potter is one of those "second degree" people.

Potter's decision to trade in his former job for a nursing degree came before the economic meltdown and after earning a college degree in art. Discovering life as a draftsman didn't suit him, Potter headed to Roanoke College to study art and graphic design. While he finished his bachelor's degree in 2001, he never did go into graphic design. Instead, he ended up serving coffee.

It wasn't until 2004 when he turned to health care. Knowing Carilion Clinic would pay for employees to go to school, Potter ultimately landed a job as a front office person at a pediatric clinic. Six months after that, when he became eligible for Carilion's tuition waiver program, he started taking nursing classes at Jefferson College.

Potter finished his associate degree in nursing in May and passed his licensing exam in June. Since then he's been working in the geriatric unit at Carilion Roanoke Memorial Hospital.

Now, Potter is considering heading back to Jefferson College for a master's degree in nursing.

"Absolutely, the economy is a factor in that decision," Potter said. "I'm almost assured of always having a job. I will probably never want for a job. But I think that any time you have more education and experience in a field, you become more" employable.

Getting hired

Crouch, like Potter, is also counting on the luxury of being able to find a job in multiple markets should that be necessary. Although she doesn't want to move.

Crouch, 28, began classes at Virginia Western in 2006 to take the prerequisites needed to start the dental hygienist program in 2007. She will graduate May 15.

While Crouch has not found a job yet, she said she chose the field in hopes of bettering her employment prospects.

She admitted she is "a little concerned" about finding a job given the state of the economy, but said she thinks she is in a better position than before heading off to school.

Kornegay said many May graduates from the health technology division, which includes the nursing and dental hygienist programs, have jobs lined up and called the job prospects "very good."

Radford's Linville also said that he expects graduates to easily find jobs, especially once the two new programs in occupational therapy and physical therapy start graduating students.

That said, the recession has changed the projections slightly. In nursing, more nurses who were nearing retirement have delayed that decision. Additionally, older nurses and those who decided to take a break to raise children are heading back into the work force. This is creating an increased competition on open positions for new nursing graduates.

Kornegay said it may mean new nurses have to look at more options and not focus on top preferences.

"Some of those who wanted to be in the hospital setting may have to look at private practice openings, but there is still such a demand for nurses that I think it is a pretty secure world out there for people in health care," she said.

But Beck, director of the Healthcare Workforce Data Center, said, "The relief from the shortage is temporary. Do not get distracted. ...

"The real shortage is coming 10 to 15 years down the road when all the nurses retire," she said. "It is just like a tsunami effect, when you add in the aging of the population."

In Face of Recession, Health Care Fields Continue to See Strong Demand

The U.S. lost over 650,000 jobs in February alone, but the health care industry added 27,000. On average, health care added 30,000 positions per month for the year 2008, making a health care degree seemingly recession-proof.

The U.S. Bureau of Labor Statistics projects the industry will create 3 million new jobs over the next 10 years, in part driven by an expanding elderly population.

Physical therapists and occupational therapists will be in very high demand, while the traditional roles of nurses and physicians' assistants will also continue to grow.

A physical therapist must have a master's degree and license, while an occupational therapist needs a bachelor's degree and license. Strong industry demand, coupled with a shortage of qualified personnel, mean the holder of a nursing degree is in an excellent position for employment for the foreseeable future. Educational requirements range from a master's degree to an associate's degree, depending on the type of work the prospective nurse desires.

High school graduates can become qualified nursing assistants by receiving a nursing certificate. CNA candidates need to enroll in and complete a medical terminology course to learn terms and to understand medical charts.

Radiologists, medical technologist, and pharmacy degree holders will also continue to be in high demand.

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