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Wells Fargo’s Maziek Takes the Pulse of Healthcare Finance

Date: Jan 19, 2015 @ 07:00 AM
Filed Under: Healthcare Finance

Maziek:  I think a healthcare company’s ability to succeed is directly influenced by its management’s knowledge of micro and macro sector trends. By micro trends, I mean local and regional dynamics affecting their industry sector. Successful providers are also aware of what Washington is doing as well as the individual things affecting their industry in these broader contexts, such as demographic changes and the like.

There are other characteristics that contribute to success and failure. Certainly an ability to contain the costs of delivering services is absolutely paramount in healthcare. Healthcare is unlike other industries in that margins can be extremely low and managing costs is very relevant. Successful companies are seem to be focused on providing quality patient outcomes. I think one other thing that is commonly overlooked among practicing healthcare professionals (as opposed to business professionals) is the knowledge and skill to accurately bill and collect.

Healthcare billing is extremely complex. If you don’t know how to bill and collect accurately and efficiently, it can really upset the success of the business. Companies that struggle to survive tend to be less effective in this particular area – billing and collection. It’s a common pitfall.

Another pitfall, and it’s a corollary to something I mentioned earlier, is being out of tune with either national or regional trends … not spotting the changes within the industry. For example, industry consolidation could lead to effectively locking out providers that don't offer the breadth of service offered by others. We've seen companies lose sight of important things like competitive dynamics, and that creates problems for them.

ABL Advisor:  Is competition in the healthcare finance space as fierce as we hear it is in other borrower sectors? How is that reflected in terms of the pricing and structuring of deals?

Maziek:  We experienced increased competition in healthcare finance relative to what we’ve seen in prior years. However, I don’t think that the competition we are experiencing is comparable to what is being experienced in the commercial and industrial or other "non-specialized" asset-based lending sectors. While we are seeing more competition, I don’t think the competition we face is as severe as it is in the other sectors.

That said, competition is affecting both pricing and structuring of deals depending on the product we are delivering. Our group is unique to Wells Fargo Capital Finance in that we also offer real estate loans and selective cash-flow loans because we view the business as an industry vertical as opposed to a product vertical. In terms of asset-based lending, I would say pricing has been impacted, but less so in terms of structure. The same holds true with real estate.

On the cash flow side, there is no doubt that both pricing and structuring have been severely impacted by today’s competitive forces. As a result, we’re selective in terms of the cash-flow opportunities we choose to pursue.

ABL Advisor:  As we move into 2015, where are things now in terms of healthcare and healthcare finance?

Maziek:  I’m seeing the same trends continuing: increased regulatory scrutiny and oversight with continued emphasis at both the federal and state level on detecting and eliminating fraud and abuse. No doubt, that trend is here to stay.

With both sides of Congress in conservative hands, I think cost pressures are going to continue and I expect efforts in that regard may even pick up steam.

Another thing that is often overlooked that has already affected our industry –– is the trend toward consumerism in healthcare. Both employer-provided and ACA insurance plans are increasingly shifting the payment burden to consumers in the form of higher deductibles and copays. This changes many of the payment and pricing dynamics within healthcare. I think this trend will continue.

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