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HIRE BEST FIT, NOT BEST RESUME PENSIONS WILL EAT UP STATE BUDGET

ALREADY TIME TO HANDICAP 2014 GOVERNOR’S RACE

REGION’S BUSINESS

PHILADELPHIA EDITION

A JOURNAL OF BUSINESS AND POLITICS

OBAMACARE: MORE QUESTIONS THAN ANSWERS The governor has some big decisions to make while business owners, doctors, hospitals and insurance brokers scramble to figure out what it all means.

COURT RULING ON PAY RAISES ALTERS PHILADELPHIA’S FINANCIAL OUTLOOK NEW CHANCELLOR SETS LOFTY AGENDA FOR BAR ASSOCIATION STATE CASHES IN ON CYBER MONDAY RegionsBusiness.com $2.00 U.S.

29 NOVEMBER 2012


29 NOVEMBER 2012

REGIONSBUSINESS.COM

CONTENTS

20

Questions Abound About Obamacare

BUILDING AN INNOVATIVE CULTURE REQUIRES THAT YOU STRIKE A BALANCE, LEARNING FROM YOUR COMPETITORS’ MISTAKES WHILE PUSHING AHEAD WITH IDEAS OF YOUR OWN..’

President Obama’s re-election ensured that the Affordable Care Act would not be repealed. But that’s about the only question that’s been answered.

!

15

State’s Uncertainty Not Helping

The Corbett administration has big decisions to make about implementing Obamacare. Until that first domino falls, many stakeholders will remain paralyzed. !

13

City’s Labor Unrest Still Smoldering City council will hold hearings on firefighter transfers, but the core issue may be tension between Mayor Nutter and the city’s unions. !

—RICHARD BRANSON

The Race Is On for 2014

! Gov. Tom Corbett’s weak approval ratings have Republicans and Democrats alike considering a challenge in 2014.

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PRG welcomes National Penn Bank to their newest center city location at the corner of 21st and Market. Occupancy is scheduled for the Spring 2013 while the apartments above have begun delivery, totaling 282 units. PRG would also like to thank Metro Commercial Real Estate and Joe Dougherty for their efforts representing the Tenant.

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REGION’S BUSINESS

3

New Bar Chancellor's Big Agenda

! Kathleen Wilkinson becomes only the sixth woman to lead the Philadelphia Bar Association, but takes over with plans for an aggressive agenda.

PRESIDENT AND PUBLISHER James D. McDonald

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EDITORIAL DIRECTOR Karl M. Smith ASSOCIATE EDITOR Terrence Casey CONTENT TEAM Brandon Baker, Emily DiCicco, Victoria

Marchiony CONTRIBUTORS Michael Jacobs, Holly Clark, Melissa

Daniels, Timothy Holwick, Don Lee ADVERTISING DIRECTOR Larry Smallacombe DIRECTOR OF BUSINESS DEVELOPMENT Jim Bauer ACCOUNT MANAGER Rachel Sollberger

© Copyright 2012 Independence Media Corp. All rights reserved. Use of material within without express permission of publisher is prohibited. Region’s Business is published weekly on Thursdays and online at www.RegionsBusiness.com. The publisher makes no representations or warranties regarding the advertising appearing in its pages or its websites.

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29 NOVEMBER 2012

REGIONSBUSINESS.COM

EDITOR’S DESK

A Recipe For ‘Healthcare Reform: Impossible’

Karl Smith is the Editorial Director for Region’s Business. You can contact him at ksmith@regionsbusiness.com.

I am openly addicted to watching The Food Network and one of my favorite shows is “Restaurant: Impossible.” The premise is simple. Superstar chef Robert Irvine goes into a failing restaurant and is given $10,000 and free reign to turn things around. He always hates the food and when he whips up a few dishes, people always ooh and aah over how great it is. After watching this a few times, I dismissed it, figuring, “of course his food is better. He’s not cranking out a ton of food at dinner rush.” But then in one episode, an owner insists that his microwave Italian dish is faster and better than what can be done from scratch. Chef Irvine whipped it up from fresh ingredients and made it

faster. Of course, it was more tasty. Lesson: Sometimes doing a thorough job can produce better results at a lower expense. Last week, I heard an interview on NPR with Mark Bertolini, CEO of health insurance giant Aetna. It hooked me immediately when he said that people in his socioeconomic class would welcome a tax increase as long as the funds were aimed at driving down the national debt. He compared it to buying war bonds. He then moved on to talk about how healthcare reform would should - help trim that very same deficit. The interviewer asked about key ways to lower healthcare costs and his answer made my jaw drop. “I think the fact that we waste $750 billion a year on the health care system, about 30 percent of

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what we spend,” he told interviewer Renee Montagne. “So if we just fix the waste in the health care system, over 10 years that would pay back half of the nation’s deficit.” Mr. Bertolini gave several examples, but one really stood out. His example was someone who suffered congestive heart faukyre and efforts to avoid a readmission, which can cost upward of $80,000. The patients are sent home with medication and a scale equipped with Bluetooth technology. Patients are instructed to take their daily medication while standing on the scale. The hospital can now tell if their weight goes out of tolerance, which usually happens with water weight gain, which usually leads to readmission. If the hospitals get that information, they send a nurse out

to the house. Spendthrifts would see this as an extravagant expense. But the nurses either reinforce the need to take medication or have a doctor adjust the medication. Then they do something simple - make sure loose rugs are rolled up. Why? Because people with water weight gain tend to shuffle their feet. Result? Fewer falls and broken hips and money saved. In all, congestive heart failure readmissions are down 43 percent. At $80,00, that’s a lot of money, money saved by taking care of the whole patient, not just looking for operational efficiencies. Just imagine that success multiplied across multiple disciplines nationwwide. Sounds like healthcare costs can be cut “Restaurant: Impossible” style.


29 NOVEMBER 2012

REGIONSBUSINESS.COM

WEEKLY BRIEFING ECONOMY

DEVELOPMENT

Shopping Weekend Shows 9 Percent Hike in Sales from 2011

Submerged Park Proposed for Unused Property Debate continues over what to do with a multi-block stretch of space along the City Branch railroad extending to 18th Street, with architecture firms Olin Studio and Bohlin Cywinski Jackson developing plans for a submerged park, as reported by Hidden City Daily. Planning began on the conceptual project in June after ViaductGreene received a grant from the Community Design Collaborative in May. The submerged park would have an access point at two Community College of Philadelphia parking garages, a long-unused railroad bridge between 15th and 16th streets and a property on the 1500 block owned by Bart Blatstein, who is reportedly supportive of the project. Alternatively, the City Planning Commission has expressed interest in restoring the transit space for the installation of Bus Rapid Transit.

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VIADUCTGREENE.ORG

Ground Broken At $100M Temple Apartment Site The Goldenberg Group’s $100 million, 14-story apartment complex on the 1100 block of Cecil B. Moore Avenue has finally broken ground. The Blue Bell, Pa.-based development group bought what was formerly John Wanamaker Middle School in 2008 for $10.75 million from the Philadelphia School District. The apartment building will add approximately 832 beds for nearby Temple students.

Casey Calls Army Corps To Expedite Cleanup U.S. Senator Bob Casey has stepped into the spotlight to warn against the impacts of pollution at the former Frankford Arsenal on a planned multimilliondollar retail center proposed for the location. Sen. Casey called the U.S. Army Corps to expedite cleanup at the site, which has been closed for 45 years. “The Frankford Arsenal site has the potential to create jobs and grow the region’s economy, and that’s why it’s imperative the Army Corps expedite this cleanup project,” Sen. Casey said. “While the Army Corps has made some progress on the Frankford Arsenal site, it hasn’t been enough. Forty-five years is way too long to have a site that can create jobs stay idle.”

State Looking To Cash In on ‘Cyber Monday’

U.S. Housing Market Gaining Speed, Philadelphia Market Rank Improves REAL ESTATE

Signs of Recovery According to Zillow, 183 or 252 markets across the nation went as low as they’ll likely go in the third quarter, and prices were falling in the remaining markets. A Zillow survey also predicts that the average increase in home price will be 15.2 percent more than the end of last year through 2016, or 2.3 to 3.4 percent annually.

A survey conducted by BIGinsight indicated a record 247 million people scoured the literal and virtual aisles of stores throughout the four-day Thanksgiving weekend — a year-over-year increase of 9.2 percent. Across the four-day period, a total of $59.1 billion was spent by shoppers, a 12.8 percent boost from 2011. Per shopper, the average amount spent was $423. Web retailers, meanwhile, celebrated their own landmark, with online spending tracker comScore indicating that Black Friday online sales surpassed the $1 billion mark for the first time.

The U.S. Commerce Department reported that more builders broke ground on new homes in October than during any other period since July 2008, in addition to gaining 3.6 percent on September’s rate. Apartment construction rose 10 percent to a seasonally adjusted annual rate of 285,000, with home construction sliding 0.2 percent to 594,000. Application permits, meanwhile, decreased by 2.7 percent to 866,000. Supporting the optimism of the housing market, Philadelphia’s own real estate market ranked No. 16 out of 36 — a month-over-month increase of nine positions — in a Movoto Real Estate index of metropolitan areas with the strongest housing markets based on the variables of affordability, days on the market and median price.

HARRISBURG — Pennsylvanians will now pay taxes for all online purchases. Beginning this year, Pennsylvania toughened enforcement of a longstanding law requiring businesses with a physical presence in the state to collect sales taxes from online purchases. That means their customers are going to be charged that 6 percent in extra taxes when they shop online. The businesses will collect and send the tax revenue to the state. Secretary of Revenue Dan Meuser told PA Independent on Monday that it was an issue of fairness for brick-and-mortar businesses in the state that were being undercut by online sellers who could offer lower prices because the 6 percent sales tax was not included. “The tax wasn’t being enforced equitably, fairly or uniformly,” Mr. Meuser said. Prior to the Internet age, it was a simple matter to determine whether a business had to charge the sales tax — it was either located in the state or not. — PaIndependent.com


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29 NOVEMBER 2012

REGIONSBUSINESS.COM

WEEKLY BRIEFING

BUSINESS

Progress Showing for Small Businesses

Small businesses have a reason to be optimistic, as a 2012 small business climate report released November 26 by the Sustainable Business Network of Greater Philadelphia shows a moderate amount of year-over-year progress for the 93,000 small businesses in the city. Aside from finding that small businesses make up more than half of jobs in the city, specific improvements included beneficial results from a listing of smallbusiness technical assistance providers on the business-services portal, a doubling-down on tax delinquents from the city, an enhancement of the city’s online Business Services Center, the proposal of a phased-in tax exemption standard known in legislative form as “Jump Start Philly” and the approval of the Philadelphia Industrial Development Corp. as a Community Development Institution. JOBS

State Unemployment Decreases in October A report released November 16 by the Pennsylvania Department of Labor & Industry demonstrated a decrease in the state’s unemployment rate for October, down to 8.1 percent from 8.2 percent in September. Pennsylvania added 7,500 jobs in October, adding to what is now the state’s highest job total — 5,752,200 — since November 2008. The increase is largely attributable to an increasing number of service jobs, of which 7,100 were added in October, which now has the service-job total sitting at 4,929,800. Among these service industries, education and health services saw the largest rise with 4,000 jobs added.

BANKS GAMING

Philadelphia Leads In Bank Closures

Table Games Revenue Up, But Sandy Impact Felt The state’s gross revenue from table games for October increased 4.2 percent when compared to October 2011, according to the Pennsylvania Gaming Control Board. However, considering there were more casinos open in 2012 than in 2011, revenues saw a slight decrease when compared to the same period the year prior when eliminating sinceopened casinos, declining 4.4 percent. Among the hardest hit by Hurricane

DEVELOPMENT ALONG NORTH BROAD STREET MUST BE STRUCTURED SO THAT IT NURTURES, RATHER THAN SQUASHES, THE HARD-WON... MOMENTUM FOR WHICH SO MUCH EFFORT HAS BEEN EXPENDED.’ — A STATEMENT BY THE NORTH BROAD COMMUNITY COALITION, FORMED IN RESPONSE TO THE PROPOSED PROVENCE CASINO RESORT

Sandy’s impacts were Bucks County’s Parx Casino, which saw table games revenue decrease by more than 17 percent, and Philadelphia’s Sugarhouse, which saw an unusually small rise from $6.7 million to $6.8 million. Remaining strong and steady, however, Sands Casino Resort in Bethlehem saw a 19 percent increase since last month, with $12.8 million in revenue from its table games.

$3.8M Distributed Via Impact Grants The Bucks County Redevelopment Authority awarded upwards of $3.8 million in casino impact grants — funded through taxes on Pennsylvania slot machines — for those with nonexistent or insufficient health care insurance. Of the $3.8 million, reported CBS Philly, $125,000 will go toward the Bucks County Health Improvement Partnership, which maintains a clinic in Bensalem, Pa. The money will be used to maintain the clinic’s ability to provide care for uninsured patients.

TRANSPORTATION

SEPTA Outreach Taken to New Heights SEPTA’s “Where’s My SEPTA?” mobile app outreach campaign has witnessed a 1,000 percent uptick since it launched ads on regional rail trains, according to Technically Philly. The advertising blitz is a partnership between SEPTA and Code for America, which sets out to promote transit service apps like SEPTAlking and Baldwin, the former of which was developed by Chief Data Officer Mark Headd and has been used more than 2,100 times in the past two weeks.

Philadelphia continues to lead the pack in bank branch closings among major metropolitan regions, according to SNL Financial data. Philadelphia boasted only one branch opening with eight others closing during the third quarter. Year-to-date, Philadelphia has closed 51 branches, with 12 total openings. Nationally, 352 branches closed during the third quarter, down from 779 in the second quarter.

Investors Win Lawsuit After Texas Bank Failed A Dallas bankruptcy judge approved November 19 a settlement that could total more than $200 million for Philadelphiabased investment bankers and lawyers, courtesy of a Texas bank that was the fourth-largest failure during the financial downturn, The Philadelphia Inquirer reported. As a result, on December 5 the Federal Deposit Insurance Corp. will receive $42 million, with investors in the bank receiving $38 million — a fraction of the bank’s $13.5 billion worth of former assets. The remaining $150 million is expected to come next year from federal tax refunds, with 30 percent going to the FDIC and remaining funds going to the investors.

New Largest Stakeholder at Bryn Mawr Bank Corp. Lancaster, Pa.-based Fulton Financial Corp. has become the largest stakeholder in $1.8 billion-asset Bryn Mawr Bank Corp. after the previous largest shareholder, Haverford Trust Co. founder George W. Connell, liquidated his 14 percent holding. The $16 billionasset Fulton acquired a 7.3 percent stake, which equates to a little more than 970,000 shares, according to a Securities and Exchange Commission filing from the week of November 16. Bryn Mawr Chairman and CEO Ted Peters said the acquisition was done only for investment purposes and does not signal a merger or acquisition.


29 NOVEMBER 2012

REGIONSBUSINESS.COM

WEEKLY BRIEFING

HIGHER EDUCATION

College Hiring Increasing State College, Pa.-based HigherEdJobs, the leading source for jobs and career information in academia reported an analysis of U.S. Bureau of Labor Statistics (BLS) data for Q3 2012 on November 16. According to HigherEdJobs, the number of jobs at colleges and universi-

ties grew 2.2 percent, 0.8 percentage points more than increase in the number of jobs in the overall U.S. economy. Advertisements for full-time faculty were up 2.7 percent, ads for parttime faculty were up 16.8 percent, reflecting a shift to part-time hires.

HEALTH CARE

Lower Bucks Closing Maternity Ward Lower Bucks Hospital in Bristol, Pa., will close its maternity ward by the end of 2012, according to the Philadelphia Inquirer. The decision follows the recent exodus of the Center for Women’s Health in Langhorne, Pa., which had been the busiest obstetrical practice in Lower Bucks as part of Capital Health’s hospital in Hopewell Township.

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GROCERY

TOURISM

Walmart Testing Delivery Through Holiday Season

GPTMC, US Airways Initiative Targets Tourists in Flight

Walmart’s home delivery experiment is off to a strong start locally and will continue through the holidays. “We’re pleased,” said Ravi Jariwala, Walmart’s director of public relations. “We have a lot to learn and we’ll make a final evaluation at the end of the holiday season.” The program allows shoppers to go to a special section of the company’s website (walmart.com/togo) and see only items available for home delivery. A $10 charge covers the delivery, regardless of size. Orders made by noon are delivered that day. Walmart is running the test during the holiday shopping season in Philadelphia, northern Virginia, Minneapolis and San Jose/San Francisco. He said the test was another step in Walmart’s plan to more closely integrate the website and physical locations. Walmart offers in-store delivery from the website, but also allows customers to pay for online purchases at brick-and-mortar stores. Mr. Jariwala said that program now accounts for two percent of Walmart’s online sales.

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US Air passengers will get a feel for everything Philadelphia has to offer when March rolls around. That’s because the Greater Philadelphia Tourism Marketing Corporation will look to duplicate the success of its June initiative that used more than 70 pages of the airline’s in-flight magazine to introduce thousands of people to the region’s arts and culture scene. Sharon Rossi, GPTMC’s vice president for advertising, said necessity was the mother of a great initiative. “The media value of what we did in June was $569,000,” she said. “There’s no way we could have afforded to do that. There’s no way any of the 60 participants could have afforded to do that.” Ms. Rossi said the March spread will focus on her group’s mantra: “Inspiration can happen anywhere. In Philadelphia, it happens everywhere.” “We know that residents and visitors are attracted to cities that have it all,” she said. “So this will be a broad-based representation of all that Philadelphia has to offer.”

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29 NOVEMBER 2012

REGIONSBUSINESS.COM

WEEKLY BRIEFING

PHILADELPHIA PARKING AUTHORITY

City Encourages Holiday Shopping With Free Parking

RETAIL

SPORTS

Acquisition Hurts Campbell Income

Philadelphia Spurned Again by Women’s Soccer League

Campbell Soup Co. boasted a healthy 8 percent revenue rise in its first quarter, with the increase attributed to both a new product line and an acquisition of Bolthouse Farms of California, according to The Philadelphia Inquirer. Still, profits fell as a result of transaction and restructuring costs amounting to $31 million. Net earnings fell to $245 million from $265 million during the same period last year, with debt rising to $4.1 billion from $2.7 billion as a result of its Bolthouse acquisition.

Philadelphia will remain without a women’s soccer team, after its third try in 13 years, U.S. Soccer announced recently. The new eight-team league will play in the spring with teams from New Jersey, Washington, D.C.; Boston; Chicago; Seattle; Portland, Ore.; Kansas City, Mo.; and Rochester, N.Y. The city last maintained a women’s team with the Philadelphia Independence, which played in Women’s Professional Soccer from 2009 to 2011. RESEARCH

SUPERSTORM SANDY

Local Genomics Center Awarded $100K Grant

The Philadelphia Parking Authority will offer free meter parking throughout Philadelphia, including commercial districts such as Chestnut Hill, University City, and Old City after 11 a.m. every Saturday through December 29. On these select Saturdays, the PPA will also offer a discounted rate of $8 from 11 a.m. to 5 p.m. at Center City parking garages in Old City, Independence Mall, Jefferson, the Gallery, 8th & Filbert Streets and JFK Plaza. The city is hoping the free parking will inspire holiday shoppers to leave the suburbs to find this year’s gifts. Ocean City, NJ

PHILADELPHIA PARKING AUTHORITY

Facing Huge Losses, USPS Tests Same-Day Delivery Program In an effort to keep up with retail competitors offering expedited shipping services, the U.S. Postal Service will begin a sameday delivery service starting December 12 in San Francisco, reported CBS Philly. The service will begin in San Francisco, with the Postal Service aiming to expand to other major cities if the program proves to be successful. If expanded to 10 cities, Metro Post — the program’s official name — would potentially bring in $500 million. Still, the earnings would only put a dent in the loss of $15.9 billion the Postal Service recently reported for the year.

PETER MILLER

NJ Sandy Damages Estimated at $30B New Jersey Governor Chris Christie estimated that damage caused by Hurricane Sandy could cost around $29.4 billion in the state; however, that estimate could increase as the damage is further evaluated and 2013’s tourism losses are considered. While FEMA has more than $8 million available in disaster relief funding, a spokeswoman from the organization told the Philadelphia Inquirer that it has not yet determined how the funds will be distributed to states affected by the storm. Since the storm, FEMA has paid out around $248 million. According to the Associated Press, it has inspected 96 percent of the homes that it was requested to check. New Jersey Senator Michael Doherty is in the process of

creating legislation that would mandate any shore spot receiving these funds for rebuilding purposes provide free access to the public. “I’ve long believed that the state’s beach tag system unfairly limits access to a public resource which has been the beneficiary of a great deal of state and federal investment. The damage done by Hurricane Sandy simply illustrates this point on an unprecedented scale. The Jersey Shore is a state treasure and an important economic engine, but it is a resource that belongs to all of us and is maintained by the taxes that all of us pay,” the senator told NJ.com.

The Wynnewood, Pa.-based LIMR Chemical Genomics Center, which is a subsidiary of Lankenau Institute for Medical Research, has been awarded a Grand Challenges Explorations grant from the Bill & Melinda Gates Foundation. The grant amounts to $100,000 and will be used to further develop an ultrahigh throughput screening technology intended to discover drugs capable of treating strains of malaria that are drug-resistant. Upon receiving the grant, the center is automatically eligible to receive a follow-up grant of as much as $1 million. MANUFACTURING

Met-Pro Divides Roles Of Chairman, CEO Met-Pro, a pollution control and filtration solutions company based in Harleysville, Pa., announced the separation of its roles of chairman of the board and chief executive officer earlier this month. George H. Glatfelter II has been elected chairman of the board by Met-Pro’s board of directors, with long-time Chairman and Chief Executive Officer Raymond J. De Hont retaining the latter position.


29 NOVEMBER 2012

REGIONSBUSINESS.COM

WEEKLY BRIEFING

Tastykake Maker, Others to Bid on Hostess Products

ENERGY

PPL Lowers December Rates PPL Electric Utilities, based in Allentown, Pa., announced November 21 that residential customers’ rates will decrease in December to 7.544 cents per kilowatthour from 7.907. Fo r s m a l l businesses, the new rate will be 10.206 cents per kilowatt hour, a decrease from 10.346 cents. Notably, these rates only apply to customers who have not switched to an alternative supplier for their electricity.

After failing to negotiate with striking workers from the Bakery, Confectionery, Tobacco and Grain Millers Union, Irving, Texasbased Hostess Brands, the maker of approximately 30 brands including Wonder Bread and Twinkies, has shut down operations and liquidated its assets. The company is expected to begin auctioning off its assets in the coming weeks and several potential buyers have already emerged. While some of the brand’s most popular products are potentially worth hundreds of millions of dollars, Hostess may not receive full value for the assets due to the nature of bankruptcy proceedings and distressed asset sales, Amit Sharma, a New York-based analyst at BMO Capital Markets told the Wall Street Journal. Parties who have expressed interest in bidding on Hostess assets include: — C. Dean Metropoulos & Co., owner of Pabst Brewing Co., (Bloomberg) — Hurst Capital L.L.P., a small Florida buyout firm (company e-mail) — Sun Capital Partners Inc., the Florida firm co-headed by Philadelphia 76ers co-owner Marc J. Leder. Sun already owns Manayunk-based PaperWorks, South Jersey’s Aluminum Shapes and Jevic Transportation, among other firms. (Philadelphia Inquirer) Great American Group Inc., a liquidation firm (Memphis Business Journal)

Though the company has not yet publicly stated an intention to acquire Hostess, Thomasville, Ga.-based Flower Foods Inc., the maker of Philadelphia’s Tastykake and Nature’s Own baked goods is widely expected to bid on the company. With $2.8 billion in revenue in 2011, Flower Foods, which has acquired more than 100 companies since going public in 1968, is the nation’s second-largest baker by sales. Though previously concentrated in the southern United States, Flower began expanding into new markets with the 2011 acquisition of Tastykake. Nationally distributed Hostess brands such as Twinkies, Ho Hos and Ding Dongs offer an attractive platform for continued expansion. The company has announced that it has renegotiated lending terms that could allow it to tap additional cash, a signal many have interpreted to mean that it could be gearing up to make a bid.

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29 NOVEMBER 2012

REGIONSBUSINESS.COM

WEEKLY BRIEFING GOTTA-HAVE-IT GADGET EXECUTIVE BOOKSHELF

Laughing to Dull Pain In his second novel, “A Southern Solution,” satirist Alan Beck follows a retired psychiatrist as he attempts to escape the chaos and corruption of America in Mexico. The story is a dark satire about the chaos created by the disappearing American Dream that will appeal to audiences disillusioned with current political, economic and ethical state of America. Using humor to address serious current events, Mr. Beck hopes to allow readers to laugh because, as he says, “If you can’t laugh at it, it’s only going to hurt.”

MUST-HAVE APP

PrintBrush Before the days of online signatures and electronic filing, when we still needed to attend to paper documents on-the-go, the revolution miniaturizing office supplies was the easiest way to make work portable. The need for hard copies is not yet obsolete. Printbrush, designed by PrintDreams, uses Bluetooth communication and rechargeable batteries to allow you to print anywhere, on any flat surface, including fabric material and letter envelopes. Simply run Printbrush over the desired surface and it will deposit black and white printer ink on the page in 600 DPI. The 4x6 inch device retails for $200.

Perspective. Delivered. To subscribe, call 877.700.6245 or 215.627.6397

REGION’S BUSINESS A JOURNAL OF BUSINESS & POLITICS

MDConnectMe When Scott Anzel and Dr. Chad Gordon developed the web-based app MDconnectME, their goal was to do away with the slow, anxiety-producing, and (now) antiquated method of communicating via pager by enabling clinicians to send regular updates to a patient-directed list of recipients who, as their tagline asserts, “matter when it matters most.” Patients select an average of five or six contacts who begin receiving text messages as early as two weeks prior to a surgery, continuing through discharge. To avoid violating HIPAA, pre-filled messages are chosen from a userfriendly drop-down menu. The app came in handy at the Mount Sinai Medical Center during Hurricane Sandy, when the hospital had to take in patients who had been evacuated from other facilities and needed to update families about the location and condition of their loved ones. WHO TO FOLLOW

@TimBerry

Founder of Palo Alto Software RT @TimBerry I don’t get it. Why isn’t every day small business day? — November 24, 2012


29 NOVEMBER 2012

REGIONSBUSINESS.COM

DEALBOOK

13

RETAIL

Philadelphia Firm Buys EMS Outdoor retailed Eastern Mountain Sports has been acquired by Philadelphiabased Versa Capital Management, the company announced in a statement Monday. EMS currently has 69 locations in 12 states and is now under the leadership of Mark Walsh, a Versa principal and Chairman of Bob’s Stores, a northeastern apparel retailer. Mr. Walsh said in a statement he will consider collaboration between EMS and Bob’s Stores. Financial terms of the acquisition were not disclosed.

HEALTH CARE

ENERGY

Medical Software Company Formed After Acquisitions

UGI Subsidiary Acquires Polish Distribution Unit

Following multiple Philadelphia-area data firm acquisitions, Silicon Valley’s investment firm, Symphony Technology Group, has combined several into a new company, Symphony Health Solutions, which it hopes to build into a national medical-software giant based in Horsham, Pa. The company is comprised of AlphaDetail, ImpactRX and Source Healthcare Analytics, which were each acquired within the last two years. “We think it’s going to be a really interesting decade in health care. We want to be part of it,” J.T. Treadwell, Symphony Technology Group managing director and Symphony Health’s new owner told The Philadelphia Inquirer. Nearly half of Symphony Health’s 500 employees work in the Philadelphia area, according to the Inquirer.

Valley Forge, Pa.-based energy company UGI Corp. recently announced that its subsidiary, Flaga GmbH, has acquired the LPG distribution business of BP in Poland in a deal with undisclosed terms. Flaga GmbH acquired BP’s Denmark LPG business in 2010. UGI’s expanding international propane business distributed more than 600 million gallons of LPG throughout Europe. REAL ESTATE

NE Phila. Data Center Purchased for

Community Center, Einstein Creating Health Care Center The Klein Jewish Community Center and Einstein Healthcare Network will jointly open a Wellness Center December 10 at 10100 Jamison Avenue in Northeast Philadelphia for community center adult members and local residents, Klein JCC President and Chief Executive Officer Andre Krug announced this week.

GOOGLE

More than 120,000 square feet in the Byberry Industrial Park in Northeast Philadelphia was sold by SCX Corp. to Carter Validus Mission Critical REIT Inc., of Tampa, Fla. for $65 million, or $540 per square foot, according to The Philadelphia Inquirer.


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29 NOVEMBER 2012

PHILADELPHIA POLITICS

REGIONSBUSINESS.COM

Court Ruling On Raises Alters City’s Financial Stability

IRISH PHILADELPHIA PHOTO ESSAYS

Philadelphia Court of Common Pleas Judge Idee C. Fox recently upheld raises awarded to city firefighters through labor arbitration in 2010. The City of Philadelphia had been fighting to overturn the award, but Judge Fox upheld the three-percent raise to the city’s 2,100 firefighters who are represented by the International Association of Firefighters (IAFF) Local 22. In 2010, the city had argued that it could not comply with the award, which would cost more than $200 million during the next five years. The rationale of the city’s argument rested on the simple fact that it could not afford to pay the firefighters, and the same laws that created the Pennsylvania Intergovernmental Cooperation Authority (PICA) required that it operate under a balanced budget, as submitted in a five-year plan to PICA each year. At the time, IAFF Local 22 members pointed to potential sources of tax revenue for the city that could help balance out the costs. Their argument insisted that a vital service such as the firefighters could not be brushed aside when the money could be found somewhere. In a statement at the time, Philadelphia Mayor Michael A. Nutter said, “we will not agree to an award that could jeopardize the city’s financial position.” Mayor Nutter insisted that these types of awards and pay increases are what has put the city in financial trouble, and he would not continue down that path. Mayor Nutter’s hand has now been

CITY COUNCIL MATTERS

Timothy Holwick is a freelance writer covering Philadelphia government. Find more coverage at citycouncilmatters. com and follow him on Twitter @ CityCouncilBlog.

CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness. com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.

forced as Judge Fox has upheld the arbitration award, and the city will be forced to implement the three-percent raise for firefighters in Philadelphia. While the goals of PICA formed the city’s argument against the award, the mayor will not find sympathy there. When Philadelphia’s last Five-Year Plan was approved, the PICA report pointed out how the city has failed to plan for this very ruling. PICA’s report in approving the Five-Year Plan outlined risks it saw for the City of Philadelphia’s financial outlook and fiscal stability. The PICA report stated, “the outstanding labor contracts are the single largest shortterm financial risk to the [Five-Year] Plan since the City does not include any increased costs for new contracts for the International Association of Fire Fighters (IAFF) … in the Plan.” The report’s language was so unequivocal that many questioned why the Five-Year Plan was even approved in light of the outstanding labor risks. The PICA report built in a directive in the event that the IAFF arbitration ruling went against the city. The report requires that Philadelphia now revise its Five-Year Plan to “demonstrate that there are sufficient funds to cover these costs or unrealized savings” according to the report’s text. The Nutter Administration has not yet commented on the ruling, and may well decide to appeal to the Commonwealth of Pennsylvania Court.

HEALTH CARE

Councilman Plans to Introduce Paid Sick Leave Bill in January After a roundtable discus- a bill; last year his resolution sion between Councilman Bill passed in council but was Greenlee and several small ultimately vetoed by Mayor Michael A. Nutter. business owners at City Mayor Nutter said Hall on his mandatory last year that the bill paid sick days bill, the “would put thousands councilman said he of jobs at risk and will introduce the bill discourage businesses in January. from coming to the city The legislation, coGreenlee of Philadelphia.” sponsored by CouncilThe Greater Philadelphia man Wilson Goode, would mandate businesses with six to Chamber of Commerce and 10 employees to allow workers Comcast have both lobbied to earn four days; businesses against the bill, according to with 11 or more employees Philadelphia Weekly. Other areas such as San would be required to allow Francisco, Seattle and the state employees to earn seven. This isn’t the first time Mr. of Connecticut all require paid Greenlee has tried to pass such sick days. GAMING

Councilmen Seek Casino Plan Hearing

Hollywood Casino at Penn National Race Course in Grantville, Pa., is owned by Penn National Gaming Inc., which is one of six companies pushing for a gaming license in Philadelphia. City Councilman Kenyatta Johnson plans to submit a resolution November 29 seeking a hearing regarding Penn National’s proposal, which calls for giving two-thirds of casino profits toward city schools and the city pension fund. HERSHEY HARRISBURG REGIONAL VISITORS BUREAU OFFICE OF THE CONTROLLER

Election Process Under Review

Because there were nearly 27,000 provisional votes this past election, twice as many as four years ago, City Controller Alan Butkovitz will review the city’s election process. “The audit is intended to clarify the numerous potential problems that have been reported with the provisional ballots,” Mr. Butkovitz said in a statement.

Report Finds $1.4B in Errors in Phila. Financial Statements The City of Philadelphia Report on Internal Control, Compliance and Other Matters for Fiscal 2011 identified in $1.4 billion in errors in city financial statements due to a lack of adequate employee training, written financial guidelines or a mandated independent review, according to the Controller’s Office.


29 NOVEMBER 2012

PENNSYLVANIA POLITICS

REGIONSBUSINESS.COM

State’s Uncertainty on Health Care Law Not Helping With Implementation

Melissa Daniels is a reporter for the Pennsylvania Independent. Contact her at melissa@ paindependent.com.

CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.

HARRISBURG — Few government maneuvers can drum up as much uncertainty and confusion as thousands of pages of complex legislation. To this point, the Patient Protection and Affordable Care Act is textbook. Many business owners say they’re afraid to hire. They’re afraid to increase wages, fill positions or spend reserves, in the face of the law’s requirements. Pennsylvania’s administration, it seems, is just as uncertain. The law that aims to provide health care access to millions of Americans appears stuck in its own bureaucracy. As of late November, commonwealth officials had yet to say whether they will expand the Medicaid program to new eligibility standards come 2014, or if it would run its own health insurance exchange. The federal government, officials say, needs to supply more answers regarding implementation. Meanwhile, the clock ticks down to the 2013-2014 budget proposal, when the state would have to factor in PPACA-related costs. One of the keys to understanding PPACA’s affect on insurance purchasing is the 50-employee benchmark. If a business employs more than 50 people and doesn’t offer insurance, it will face a $2,000 fine for each full-time worker, minus the first 30 employees. Employers can also get hit with a $3,000 per-employee fine if they don’t offer coverage that the government considers affordable. See how things could get confusing? No penalties exist for businesses with fewer than 50 employees. So, if the local-owned supermarket has 52 full-time employees but has never offered health insurance, laying off a few workers could spare the owner a $40,000 penalty. The idea here is that employers will get health insurance rather than pay the penalty. This is where the state health insurance exchanges come into play, as marketplaces for purchasing individual or group plans that will operate like Expedia for travel. The exchanges will be policy-in-action, crossing right through the intersection of

GOVERNOR’S OFFICE

government, health care and individual purchasing power in a fairly unprecedented way (Or is the government helping you shop for your tires and designer handbags, too?). So it’s not surprising that planning them is confusing in its own way. States can run exchanges themselves, in partnership with the federal government, or relay the responsibility to the feds altogether. Though exchanges are supposed to be operational by 2014, the federal government already had to extend a declaration deadline to allow states more time to make up their minds. Pennsylvania has yet to commit to taking the project on as its own, despite holding onto around $33 million in federal funds meant for implementation. Once that dries up, it would be up to the state to pay for it. Before making its decision, however, the Department of Insurance fielded around two dozen questions to the federal government. That was in August. It is still awaiting those answers. So it’s not just the law that’s got businesses wondering how much — and where — to spend. With Pennsylvania dragging its decisions out until what could be the last minute, it’s making things even more complicated. Sure, there’s little evidence to suggest the American business climate of the 21st century is really all that certain to begin with. But with federal laws and state compliance being what they are, the best thing a business owner can do amidst the unknown is get educated on what this new age of health care reform means for their particular situation. The commonwealth of Pennsylvania would be wise to do the same.

15

ELECTION 2014

Hanger First To Officially Challenge Gov. Corbett Former DEP Secretary John Hanger will run for Governor against Tom Corbett, his newly formed campaign announced Monday. In a series of three stops, the Democrat began his candidacy Wednesday in Philadelphia. From there he planned to travel to Harrisburg and continue on to Pittsburgh Thursday. “John will travel by school bus between Philadelphia and Harrisburg to emphasize his commitment to public education and to all Pennsylvanians,” wrote spokeswoman Kathleen Daugherty. PoliticsPA broke the news two weeks ago that Hanger, who served as Secretary of Environmental Protection from 2008 to 2011, was exploring a bid. Prior to that, he founded and lead the environmental group PennFuture — presently the largest eco-group in Pa. not to call for a moratorium on Marcellus shale gas drilling. PENNSYLVANIA LOTTERY

State Considers Sole Bid in Lottery Privatization Hoping to privatize management of the state lottery, Pennsylvania has only one bid left to consider — Camelot Global Services, which runs the National Lottery in the United Kingdom. The company estimated an annual profit commitment of $12.1 billion in the first 10 years. According to the official bid tabulation, projections for a 20-year period, assuming a 27-percent mandated rate of return, would yield more than $34 billion in profits. Annual profit projections from Camelot show profits as high as $1.9 billion within the next 20 years. Before making a decision, the state will investigate Camelot’s criminal history, business practices and contract integrity. Lottery revenue provides funds for services such as free transit, rent and property tax rebates, senior centers and prescription drug assistance programs. According to a Department of Revenue fact sheet, the commonwealth expects that it could carry out a management agreement as early as the beginning of next year.


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29 NOVEMBER 2012

POLITICAL COMMENTARY

REGIONSBUSINESS.COM

17

States’ Reluctance to Institute Obamacare Practical, Not Political

Charlie Gerow is CEO of Quantum Communications, a Harrisburg-based public relations and issue advocacy firm.

CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.

Elections have consequences, and one of the consequences of the presidential election is Obamacare. Gone is talk of repealing the socalled Affordable Care Act. The focus now is on implementation of the gargantuan health care system restructuring. When Nancy Pelosi told the nation to wait to find out what was actually in the bill she was urging Congress to pass, she may not have known the half of it. Obamacare should take effect in fewer than 300 days, but the administration is lightyears behind schedule. The complexity of the cumbersome new law is causing even its advocates headaches. States are now the center of both the ongoing debate as well as the technical difficulties with implementation. Not coincidentally, most of the state legislatures and governors are Republicans who are now being asked to help put into effect an unworkable and financially unsustainable law. There are two key elements facing the states. First is setting up the “exchanges,” the bureaucracies that will regulate the structure and sale of health insurance for the more than 30 million

people who will have subsidized coverage. The other is the issue of whether states opt to expand their Medicaid coverage to include individuals below 138 percent of the federal poverty level (the federal government would make all the payments for the first few years). The states have been slow to set up exchanges, slow enough to cause HHS to extend the deadline twice already. To date,17 states have set up exchanges. Pennsylvania is among the majority of states that have not. Six others have set up hybrid models. With the clock ticking, it is clear the federal government will set up the exchanges for the majority of states. There’s a dirty little secret in this fact: The subsidies only apply for exchanges set up by states. That’s another story for another day, but it is certainly important to mention in any discussion of the exchanges. The states’ reluctance is not political; it’s coldly practical. Obamacare is much more difficult and costly to implement than advertised. The states get no advantage by establishing exchanges; they are essentially vendors to HHS. If Obamacare doesn’t work out, voters will blame gover-

nors and legislators. It will cost a lot of money to set up the exchanges. States like Pennsylvania already regulate insurers and will continue to do so. And there’s a fail safe: If states decide that they would like to replace the federal exchange later, under the Act they can do it. There’s simply no rush to act. The Medicaid expansion decision boils down to basic cost analysis. While the provision for federal tax dollars to be used for the initial payments is meant to be attractive to the states, there is no doubt that as early as 2019 the expansion would become a very heavy financial burden for them. Sadly, Obamacare is here to stay after being rammed through on a straight party passage by the narrowest of margins. It survived a constitutional challenge by a creative Supreme Court decision. It is a consequence of the election. It is increasingly obvious that it is not the panacea its proponents promised. It is an increasingly bureaucratic nightmare. The majority of states are simply not willing to carry the water for the feds and take the blame when things don’t work out.


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REGIONSBUSINESS.COM

POLITICS

ECONOMY

STATE

ECONOMY

Pensions Taking Balance Out Of Future PA Budgets

Lawmakers Receiving Pay Raises, Dozens Plan To Decline Increase

Obama Visiting Hatfield Friday

While Pennsylvania lawmakers are receiving a 2.2 percent pay increase next year, Governor Tom Corbett and 38 members of his executive branch say they will decline the money, according to the Pittsburgh TribuneReview. The raises go into effect between December and January for those accepting the raise, which will increase lawmakers salary to over $83,000. This will

increase cost taxpayers more than $450,000 next year. According to the National Conference on State Legislatures, only California lawmakers, who receive a base salary of $95,000, made more than their Pennsylvania counterparts in 2012. According to the U.S. Census Bureau, the median household income in Pennsylvania is about $50,000.

SANDUSKY SEX ABUSE SCANDAL

HARRISBURG – Pennsylvania can expect modest economic growth over the next five years, but it will be surpassed by a surge in state pension costs that begin this year. An annual economic and budgetary projection from the state’s Independent Fiscal Office, a state equivalent of the Congressional Budget Office, forecasts 0.8 percent revenue growth this year and 3 percent annual growth for the state’s revenues in the next five years. Pension costs are projected to climb by 46 percent in this year’s budget and 42 percent in next year’s budget. “The increase in pension contributions is estimated to be about $500 million per year for the next several years,” said Mark Ryan, deputy director of the IFO. According to the report, those costs will consume 9.6 percent of the state budget by 2017 — up from 4.2 percent of the budget this year. In comparison to the skyrocketing pension costs, non-pension budgetary expenses are anticipated to climb by only 2.5 percent over the next five years — meaning they would be

sustained by the expected 3 percent annual growth in tax revenues if pension costs were not a factor. Those low growth rates are the “new normal,” said Mr. Ryan, and are due to modest growth of the labor market, declining revenues from sales taxes, demographic trends and the lack of any expected booms in housing or the stock market. By fiscal year 2017-18, pension costs will drive the state towards spending $753 million more than it takes in, according to the IFO report. The growing pension costs are the result of three events in the last decade: increased pension payouts, a reduction in the state’s contribution rate, and the economic collapse of 2008. Expected pension costs would grow larger if the state’s two pension funds — the Public School Employees Retirement System, or PSERS, and the State Employees Retirement System, or SERS — do not meet their annual expected earnings of 7.5 percent, a figure some economists believe to be overly rosy. — PaIndependent.com

Report: New Child Protection Laws Necessary in Sandusky Aftermath State lawmakers have a host of new suggestions to hear on how to improve child protection laws in a state still reeling from the Jerry Sandusky abuse scandal. The state’s Task Force on Child Protection released a much-awaited report on Tuesday, recommending essentially a re-write of the Child Protective Services Law. That includes redefining what behavior constitutes child abuse, as well as expanding who is required to report suspected child BUCKS COUNTY abuse under the law. Another recommendation is DA Seeks barring schools from entering Transformation into confidentiality agreements Task force chair, Bucks with educators accused of abuse. County District Attorney Lawmakers have publicized David Heckler, said the desires to see changes to child report recommends “a protection laws, but the question transformation” in how the is how long that process will take. state handles reports of A bulk of the 455-page task child abuse and the way force report includes drafted lan- those crimes are treated. But Mr. Heckler said many guage for proposed legislation. House Minority Leader Frank of the issues will require Dermody said he hopes to see additional public hearings before changes are these changes next session. “Part of the tragedy of recent enacted. “Strengthening child abuse scandals is how long these laws must be done it took to bring abusers to justice. as soon as possible, but We ought to work in a bipartisan we should recognize that it way in 2013 to improve state laws cannot be done overnight,” sooner rather than later,” he said. he said. PAINDEPENDENT.COM — PaIndependent.com

President Barack Obama will travel to Philadelphia suburbs November 30 for his first public event outside the nation’s capital since winning reelection. He will speak on his plans to deal with the fiscal cliff as part of an effort to influence Republicans to allow tax increases on the wealthy while extending tax cuts for families earning $250,000 or less. The White House reported the events will serve to build support for across-theboard tax increases and steep spending cuts in defense and domestic programs. While in Hatfield, the president will give a speech at The Rodon Group manufacturing facility, a company that manufactures construction toy parts, using the business as an example of a company reliant on the middle class. TRANSPORTATION

Funding Package A Priority in 2013 With an estimated $2.5 billion in road and bridge repairs at stake, lawmakers and the state administration have not reached a consensus on a funding package for Pennsylvania’s long-term highway and infrastructure. However, Governor Tom Corbett and Senator John Rafferty, chair of the Senate Transportation Committee, hope to change that in 2013, after two years of debate. While the specifics have been withheld, the senator announced his plan to raise $1 billion to $1.5 billion in its first year, growing to $2 billion by the second, during a speech before the Pennsylvania Press Club. Transportation Secretary Barry Schoch, chair of funding commission, explained to the Morning Call that the administration had broken its approach to the funding question into three parts: tackling modernization issues with the current system, tackling legislative questions and focusing on how to pay for any repairs.


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29 NOVEMBER 2012

REGIONSBUSINESS.COM

OBAMACARE SHROUDED IN UNCERTAINTY President Obama’s re-election means healthcare reform is here. The details, however, remain unclear.

STORIES BY MICHAEL JACOBS ILLUSTRATION BY DON LEE

“We

must repeal Obamacare,” Republican businessman Tom Smith told his supporters even as he conceded defeat to Democratic Sen. Bob Casey in Pennsylvania’s U.S. Senate election Nov. 6. But the re-election of President Barack Obama that night, combined with continuing Democratic control of the U.S. Senate and a smaller Republican majority in the House, dashed GOP dreams of repealing and replacing the Patient Protection and Affordable Care Act and ensured that even the slightest tweaks to the law will need Obama’s signature. “Health care reform isn’t a liability anymore” in politics,” said Antoinette Kraus, the Pennsylvania Health Access Network’s project director. “People have come to terms with the fact it’s here to stay” and are focused on how to make it work. “It’s virtually certain it’s going to take effect,” said David Burton, the general counsel of the National Small Business Association, which lobbies for small businesses in Washington. “Businesspeople are having to deal with that.” What Obamacare actually will mean in Pennsylvania as it’s fully implemented by Jan. 1, 2014, however, remains in doubt, from the number of people who will gain health insurance to how much the changes will cost the state and businesses. “The sheer uncertainty is bothering people. The complexity is bothering people,” Mr. Burton said. Business owners “don’t know whether the costs are going to be so high that they’re going to have to drop insurance. Nobody knows what the story is going to be.” We do know that much of the story will be written in Harrisburg. Gov. Tom Corbett faces two major decisions related to Obamacare: Pa^ma^kmheZng\aZlmZm^&knga^ZemabglnkZg\^ exchange, let the federal government run Pennsylvania’s exchange or form a partnership with the federal government on the exchange. Pa^ma^kmh^qiZg]F^]b\Zb]mh\ho^kZgrI^ggsylvanian under age 65 with household income of no more than 133 percent of the poverty level. That’s

$30,657 for a family of four. Neither decision is irreversible, and it’s possible that neither will cost the commonwealth any money before 2017. But those two choices and how the state and federal governments work together to make them could set the tone for whether the Affordable Care Act is a healthy newborn or spends time in neonatal intensive care. Washington remains a possible battleground for the health care law. The broad strokes of the policies are in place, but the rules and regulations are trickling out from the Department of Health and Human Services, the Department of Labor, and the Internal Revenue Service. Most of the funding for the law is set, relying on various taxes and penalties and a shift in Medicare money, but Congress could be the scene of some fiscal skirmishes, said Elizabeth Stelle, a policy analyst for the Commonwealth Foundation in Harrisburg. She said Congress will have to appropriate money to pay for federally facilitated health insurance exchanges, and bad reactions to the planned Medicare cuts could lead to efforts to add money to the health insurance program for people 65 and older. Any action to reduce the federal budget deficit also could hit Obamacare, starting with the automatic sequestration set for January, when Medicare will take a 2 percent cut unless Congress acts. “We … are seriously concerned about conversations around the federal fiscal issue’s impact on hospitals and Medicaid expansion and exchanges,” said Carolyn Scanlan, the president and CEO of the Hospital & Healthsystem Association of Pennsylvania. “They’re all interrelated.” Unspecified Medicare and Medicaid savings have long been popular ways for Congress to cut long-term budgets, and those programs might become targets again. For example, the Kaiser Commission on Medicaid and the Uninsured projects that the federal government will spend $443.5 billion from 2014 to 2019 just to expand Medicaid coverage under the Affordable Care Act. The federal government will pay all the costs in 2014, 2015 and 2016 for newly eligible people who enroll in Medicaid, then will cover 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and 90 percent

in 2020 and every year thereafter. “There’s political will to protect these programs and make sure health care reform is protected,” said Ms. Kraus, who added that Congress should raise revenue rather than cut crucial health programs. The ACA can’t stop a future Congress, however, from lowering those Medicaid payment percentages and shifting more of the burden to Pennsylvania and the other states, particularly from 2017 on, after Obama leaves office and the promise of 100 percent federal funding ends. “The states can’t depend on the federal government to take care of the majority of costs,” Ms. Stelle said. “We don’t know what will happen in five, let alone 10, years.” Still, Mr. Burton said the only major Obamacare financial fight likely will be over cuts in payments to Medicare providers, an issue that won’t stop the law’s major insurance reforms and coverage mandates from kicking in Jan. 1, 2014. “Now that the law is here to stay,” Health and Human Services Secretary Kathleen Sebelius said during a conference call Nov. 20, “I’m hopeful that states and other partners will continue to work with us to implement the law, and I welcome the opportunity to sit down with governors in the weeks ahead to discuss our work together.” But Pennsylvania officials say Sebelius’ department isn’t living up to its side of the partnership. “We’re being asked to make some of these decisions in a vacuum,” said Christine Cronkright, Gov. Corbett’s spokeswoman on health issues. State Insurance Commissioner Michael Consedine sent a list of 26

questions about Obam on Aug. 23 and compl had been in releasing law that was already m “The changes being fundamental and pote vania’s marketplace, w mindful of the conseq policy, associated with tation by Pennsylvania He followed up wi 26, in which he comp response to the August a possible deadline fou health insurance plan sylvania’s benchmark benefits mandated by The law called for essential health ben department decided t specifics within the fed The department re rule for those benefits before Thanksgiving the rule won’t become


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29 NOVEMBER 2012

REGIONSBUSINESS.COM

Obamacare specifics to Sebelius omplained about how slow HHS asing rules and other details for a ady more than 2 years old. being made as a result of PPACA are d potentially disruptive to Pennsyllace, which is why we must be onsequences, both fiscal and d with any form of implemenlvania,” Mr. Consedine wrote. up with another letter Sept. complained about getting no ugust letter and worried about ne four days later to identify the e plan that would serve as Pennmark for the 10 essential health ed by the ACA. d for HHS to establish the h benefits, but the federal ded to let each state set the he federal standards. ent released a proposed nefits two days giving;

Hospitals Wait For Crucial Element Pennsylvania’s hospitals backed the passage of the Affordable Care Act, but the U.S. Supreme Court has jeopardized the financial foundation of that support. When the high court in June upheld the constitutionality of Obamacare and its mandate for individuals to purchase health insurance, the justices also ruled that the federal government couldn’t force states to expand their Medicaid programs under the threat of losing existing Medicaid dollars. Now Pennsylvania Gov. Tom Corbett is undecided about the expansion of Medicaid coverage to anyone under age 65 with a household income of no more than 133 percent of the poverty level. “We have indicated to both the governor and the Department of Public Welfare secretary and the Legislature that we support the expansion. It makes financial sense for hospitals and the state,” said Carolyn Scanlan, who is retiring as the president and CEO of the Hospital & Healthsystem Association of Pennsylvania in mid-December. The problem for hospitals is that they made a financial trade-off in their support of the ACA: $155 billion in Medicare and Medicaid cuts nationwide, including more than $7.5 billion in Pennsylvania. Those cuts for Pennsylvania hospitals include $1.7 billion that would have partially reimbursed them for treating patients who can’t pay their bills and don’t have insurance. Hospitals thought they could absorb those cuts because the Affordable Care Act promised insurance coverage for everyone who couldn’t afford care. Without the Medicaid expansion, hospitals will still have the problem of unpaid and charity care but won’t have government money to ease the burden. “That’s a pretty significant concern for hospitals,” Ms. Scanlan said. Medicaid pays only 50 percent to 80 percent of a patient’s full hospital cost, Ms. Scanlan said, “but that’s

more than zero percent of the cost, and it’s better for individuals to have that coverage.” The Kaiser Family Foundation estimated in 2010 that 653,000 additional Pennsylvanians would become eligible for Medicaid under the ACA. If Pennsylvania opts out of the Medicaid expansion, those people will be on their own to purchase health insurance, but an estimated 483,000 of them won’t be eligible for federal subsidies because their household income is below the poverty level. “We supported the enactment of the Affordable Care Act because one of the underlying principles is to provide health insurance to the uninsured,” Ms. Scanlan said. With health insurance, people are likely to seek care sooner and visit a doctor’s office or free-standing outpatient facility instead of going to the emergency room for care, she said. “Part of the goal here is to get people getting care at the right time in their disease cycle or trauma cycle and getting primary and preventive care.” Moving people toward earlier, cheaper care outside hospitals, like the Medicaid expansion, should ease the financial pressures on the state’s acute care hospitals, one-third of which had negative operating margins in 2010, the hospital association said. But the Medicaid expansion would not solve all of the financial issues for hospitals, Ms. Scanlan said. Medicare payments still are being reduced under the ACA, and hospitals are under pressure from insurers to change how they deliver services and to bill based on value or quality of care rather than volume. The Affordable Care Act “basically said the existing way of doing things is not sustainable anymore,” said Scott Post, an Independence Blue Cross vice president, who said the Philadelphia insurer is adding pay for performance and other incentives to its hospital contracts. “We’ve got to do more to change.”


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29 NOVEMBER 2012

REGIONSBUSINESS.COM

Insurance Companies Have Plenty Of Questions, Optimism About Changes P

EVERY DAY I HAVE PEOPLE I TELL I CAN’T HELP. I FEEL REALLY BAD ABOUT THAT.’ — ABBE KLIGERMAN GETMEAHEALTHPLAN.COM

eople talk about the Affordable Care Act as health care reform, but it’s really health insurance reform. “The Affordable Care Act really gives people peace of mind when it comes to health insurance,” said Antoinette Kraus, project director for the Pennsylvania Health Access Network. The law is about increasing the number of people who are insured, expanding what that insurance covers and guaranteeing that the insurance won’t go away. Insurers such as Philadelphia’s Independence Blue Cross thus are at the center of the changes that have taken effect and will kick in by Jan. 1, 2014. “It affects us quite a bit in terms of the way we do business,” particularly in the markets for individuals and small groups, said Scott Post, IBC’s vice president of corporate and association affairs. “I wish we had a lot more answers at this point.” Already in effect is a rule that insurers must spend at least 80 percent of the premiums they collect on health care and quality improvements or provide rebates to customers. The federal Health and Human Services Department says 575,551 Pennsylvanians this year will split almost $51.6 million in insurance rebates, or $165 for each of 312,000 families. Insurance companies now must justify rate increases of more than 10 percent, and Pennsylvania has received $5.3 million from the federal government to fight excessive premium increases. HHS also says that as of December 2011, 91,000 Pennsylvanians had taken advantage of the new rule that children may stay on their parents’ insurance through age 26. Insurance plans no longer may include co-pays for a range of preventive services. Among the big changes coming in 2014 are the end of lifetime limits on coverage, the end of bans on people with pre-existing conditions and a cap of 9.5 percent of family income on employee contributions to health insurance. The end of insurance underwriting based on factors such as pre-existing conditions is what excites GetMeAHealthPlan.com founder Abbe Kligerman. “Every day I have people I tell I can’t

help,” the Conshohocken insurance broker said. She cited the recent example of a woman in her 60s with diabetes who was facing a bill of $1,100 a month to continue her insurance after retiring, and Ms. Kligerman couldn’t do anything for her. “I feel really bad about that.” HHS proposed Nov. 20 that insurers set rates in one-year increments for ages 21 to 64, a change from the current use of fiveyear bands, and that the rate for the most expensive age band can’t be more than three times the rate for the least expensive age band, compared with the current standard of 5-to-1. The one-year increments will smooth out increases, saving people from price cliffs, said Gary Cohen, the director of the Center for Consumer Information and Insurance Oversight at HHS. The 3-to-1 rate ratio, however, means that young people should expect a big premium increase in 2014; otherwise, insurers would have to reduce what they charge people in their 60s. The ACA breaks compliant health insurance plans into four tiers, based on the percentage of the costs the insured person pays: 38 percent to 42 percent for bronze; 28 percent to 32 percent for silver; 18 percent to 22 percent for gold; and 8 percent to 12 percent for platinum. Insurers are waiting for final rules on calculating those values. “We’re working as hard as we can to get things out as quickly as we can,” Mr. Cohen said. Regardless of the tier, the plans must cover “essential health benefits” in 10 categories: :f[neZmhkriZmb^gml^kob\^l' >f^k`^g\rl^kob\^l' AhlibmZebsZmbhg' FZm^kgbmrZg]g^p[hkg\Zk^'  F^gmZe a^Zema Zg] ln[lmZg\^ Z[nl^ disorder services, including behavioral health treatment. Ik^l\kbimbhg]kn`l' K^aZ[bebmZmbo^Zg]aZ[bebmZmbo^l^kob\^l and devices. EZ[hkZmhkrl^kob\^l' Ik^o^gmbo^Zg]p^eeg^lll^kob\^lZg] chronic disease management. I^]bZmkb\l^kob\^l%bg\en]bg`hkZeZg]

THE SOONER THAT CLEAR GUIDELINES COME OUT, THE BETTER FOR EVERYBODY.’ —SCOTT POST INDEPENDENCE BLUE CROSS


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vision care. The law called for HHS to define those essential benefits, but the federal department decided each state should set its own rules that comply with the federal minimums in each category. The problem for Pennsylvania and for insurers is that HHS didn’t issue a proposed rule for those minimums until Nov. 20. That proposal, which started a 30-day comment period, included a suggestion for an existing insurance plan Pennsylvania can use as a benchmark: Aetna’s point-of-service plan for the small-group market, supplemented with pediatric dental care from the Federal Employees Dental and Vision Program and with habilitative services defined by the state. “The sooner that clear guidelines come out, the better for everybody,” Mr. Post said. Small groups will see the same price increases as individuals from the rate bands and a tax of about 2 percent on

premiums, but not necessarily as much for additional benefits. The more comprehensive your policy is now, the fewer additional benefits you’ll get, producing a smaller price increase. Countering the rising premiums in the individual market are subsidies for people earning 100 percent to 400 percent of the poverty level ($23,050 to $92,200 this year for a family of four). Those subsidies are substantial up to 200 percent of the poverty level, Post said, so even if your premium rises in 2014, you could pay less. Individuals and small businesses will be able to buy insurance through Pennsylvania’s health insurance exchange, which will launch with open enrollment Oct. 1, 2013. “This is very complicated stuff. It’s confusing,” Health Advocate co-founder Marty Rosen said. “What happens when something goes wrong?” Mr. Post emphasized that rising health care costs, not anything insurers control, are the main cause of

insurance price increases every year but 2014, and the ACA doesn’t do much to control those costs. “We’re doing everything we can to make the coverages as affordable as possible,” Mr. Cohen said. Mr. Post noted that the law includes several grants and pilot programs that are “changing the way all stakeholders in the delivery system can look for more solutions and ways to work … and make the system more efficient and effective.” The Commonwealth Foundation’s Elizabeth Stelle expressed concern that the law will decrease quality health care. But IBC is working to make the system better with patient-centered medical homes, which are doctors’ offices organized to add a personal touch to comprehensive care and to guide people through the increasingly complex health care system. “I’ve described it as ‘Marcus Welby’ with an iPhone,” said Donald Liss,

IBC’s vice president of clinical programs and policy. IBC began a pilot program, the Chronic Care Initiative, with 32 practices and the Pennsylvania Department of Health in 2008, and the initiative worked well enough that IBC in 2011 began offering financial incentives to its entire network of primary care practices to make the same transition. Practices serving 38 percent of IBC members have become patient-centered medical homes. “We’re all in with regard to this initiative,” Mr. Liss said. The initiative complements an Obamacare push to create accountable care organizations and share any savings they realize in treating Medicare patients. Like patient-centered medical homes, affordable care organizations start with a strong foundation in primary care, Mr. Liss said.

ARE YOU READY TO TAKE YOUR BUSINESS TO THE NEXT LEVEL? Exploring the Future of Healthcare

Economic Outlook

Thursday, December 6 The Rittenhouse Hotel

Wednesday, January 16 Hyatt Philadelphia at the Bellevue

Regional Spotlight – Building a Logistics Network

The Art of Persuasion with Daniel Pink

Thursday, December 13 Adventure Aquarium

Women in the Workforce Friday, December 14 Radisson Plaza – Warwick Hotel

Wednesday, January 23 World Café Live

A Conversation with the Governor

Thursday, January 31 The Academy of Natural Sciences of Drexel University

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24 final until late December at the earliest. Melissa Fox, a spokeswoman for Mr. Consedine, said Nov. 21 that the state government needed time to review that proposal and others issued the same day regarding employer wellness programs, the actuarial value of insurance plans, and the rules limiting insurers to considering age, family size, location and tobacco use in setting rates. “We cannot say with certainty that any or all of the questions we asked have been answered,” Ms. Fox said. Meanwhile, the federal government dropped a Nov. 16 deadline for states to declare whether they want to run their own health insurance exchanges and, if so, to explain how they will do it. Each state will have its own online insurance exchange available for individuals and small businesses to shop for and buy health insurance and find and use any federal subsidies for which they are eligible. People can see all their options for insurance providers and different levels of cost sharing. Those options are supposed to include multistate or national insurance plans, although HHS hasn’t explained how those will meet individual states’ benefit standards. Bob Viola, the president of insurance broker Megro in Conshohocken, said the federal government wants to minimize the use of the exchange in favor of employerprovided coverage. “People think the exchanges are going to be some kind of panacea,” he said. “They’re not going to be a panacea.” Still, Ms. Scanlan said the exchange is “an important vehicle for establishing the ability of people to get insurance.” It’s a vehicle that is stalled in Pennsylvania. Gov. Corbett last year said the commonwealth intended to run its own exchange, which is the preference of the law and HHS because states then have the most flexibility to meet their needs and their insurance regulations. Gary Cohen, who heads the HHS Center for Consumer Information and Insurance Oversight, said the advantages to the states of running their own exchanges include controlling their insurance markets and the insurance products sold on the exchange and deciding how to assess the administrative costs of running the exchange. Ms. Stelle doesn’t see many advantages “because anything you do can be overwritten by HHS. They can say, ‘Oh, Pennsylvania, we don’t like the way you’re doing this.’ ” Citing the lack of answers from the federal government, Pennsylvania halted work toward creating its own exchange in August and put a hold on $34 million in federal grants meant to help establish the exchange. Meanwhile, other Republican governors have declined to run their exchanges, citing the administrative costs and lack of real flexibility, while critics have accused them of trying to obstruct Obamacare. “States are really at the front lines. Their resistance or their desire to negotiate or bargain with the federal government really will determine how this is implemented in the long term,” said Ms. Stelle, whose organization opposes the exchanges for distorting the insurance market with subsidies and regulations. “It’s virtually impossible” for Pennsylvania to plan a

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state-run exchange by the new deadline of Dec. 14 and launch it for the start of open enrollment Oct. 1 next year, Ms. Kraus said. “At this point, we don’t want Pennsylvania to rush to set up an exchange either.” Ms. Kraus’ Pennsylvania Health Access Network, the state hospital association, the National Small Business Association and Independence Blue Cross said they prefer a state-run exchange to make the most of the law for Pennsylvanians, but they don’t expect that to be Pennsylvania’s choice now. The other options are an entirely federally run exchange, for which Washington has yet to issue guidance on costs and operations, or a partnership exchange, in which the state may manage the choice of health plans in the exchange, oversee consumer assistance for using the exchange, or do both, while the federal government handles a lot of behind-the-scenes functions. If Pennsylvania passes on running its own exchange, it has until Feb. 15 to present a plan for a partnership if that’s its choice. “Our preference is that the state participate to the greatest degree possible,” said Scott Post, IBC’s vice president of corporate and association affairs. A partnership would allow Pennsylvania to learn the ropes of running an exchange while the federal government shakes down the information technology behind it. Once the exchange is running, Gov. Corbett may change the state’s choice at any time. “It’s important to note, though, that there will be no difference in experience for consumers,” no matter who runs the exchange, Mr. Cohen said. Anyone will be able to go to www.healthcare.gov to access the proper state exchange. The existence of an operating exchange is more important than who runs it, Ms. Kraus said. Mr. Burton said the same is true of many pending decisions from HHS: The exact answer doesn’t matter as much as simply having an answer.

“We will be ready. There will be an exchange in every state open for business on Oct. 1 next year,” Mr. Cohen said, adding that he is confident insurers will be ready as well. Still, he acknowledged the need to release the regulations as soon as possible. That applies throughout the ACA, Mr. Burton said. “I honestly don’t know what’s going on at HHS. … It’s just taking them so long.” The situation is similar for the less pressing (no deadline) but more important Pennsylvania decision on whether to expand Medicaid. “It’s important for our governor and our administration to really move forward,” Ms. Kraus said. “The whole process, they’ve been waiting. We’ve been missing opportunities and falling behind.” Pennsylvania can expand its Medicaid program to make 653,000 more people under age 65 eligible, and the federal government will pay all of the costs for newly eligible participants in 2014, 2015 and 2016. By 2020, the federal share will drop to 90 percent. The Pennsylvania Health Access Network says the federal contribution through 2020 will be at least $17 billion if the state opts in for 2014. “We are hopeful that states will take advantage of these resources, and history suggests they will,” HHS spokesman Fabien Levy said. But Ms. Stelle said the state’s cost over the same period is estimated to be at least $1.3 billion and as much as $5.5 billion, depending on how many newly eligible people sign up and whether the publicity of the Medicaid expansion encourages more people who already are eligible to enroll. After costs grew 83 percent in a decade, Pennsylvania spends about 30 percent of its annual state budget on Medicaid, she said. “Realistically, they can’t extend Medicaid unless they cut elsewhere or find more revenue.” Pennsylvania has asked whether a partial expansion is allowed, but HHS spokeswoman Erin Shields on Nov. 20 said only: “That question is under review.” Ms. Stelle said the state might seek more flexibility to control its current Medicaid costs to free money for the expansion. She mentioned medical savings accounts and more insurance options as possibilities. “Using this expansion proposal as leverage as a way for the state to improve care is definitely something that we shouldn’t pass up,” she said. Pennsylvania does have flexibility on the timing of its decision. The federal money will be there, so the state can announce at just about any time before 2014 that it wants to participate that year. Or the state can skip 2014 and opt in for 2015. There’s also nothing but political pressure to stop the state from taking the federal money in the three 100 percent years, then dropping out. Ms. Scanlan said it makes sense for the governor to look at the financial impact of expanded Medicaid, but


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With Many Unknowns, Small Businesses Brace For Impact Much of the uncertainty surrounding the Affordable Care Act involves the effects on businesses and their employees. While some elements of the law apply to any employer, small businesses will see most of the effects by the start of 2014. Any business with at least 50 full-time employees, defined as every worker averaging at least 30 hours a week plus all the hours worked monthly by part-timers divided by 120, is required to provide quality, affordable coverage to its full-time workers as of Jan. 1, 2014, or face a tax penalty of $2,000 per full-timer. But most large employers that were providing health insurance when the law passed in March 2010 have plans that are grandfathered in, meaning they don’t have to change what they offer as long as they don’t significantly raise employee costs, cut employer contributions or reduce benefits. They even can change insurers as long as the plan stays basically the same. The tradition of strong unions in the Northeast has produced richer, more generous health insurance plans than in other parts of the country, so large employers don’t have to make many adjustments before 2014, said Bob Viola, the president of Conshohocken-based health insurance broker Megro. He said only one of his large-employer clients in the Philadelphia area isn’t already compliant with the law, and he thinks the company’s health insurance costs will rise 1 percent to 1.5 percent in 2014 to comply. Changes will come in the other direction in 2018 when a “Cadillac tax” on premium insurance plans kicks in, forcing union plans in particular to cut back, Mr. Viola said. “What we do in Philadelphia is really different than other areas. The needs are different. The structure is different. How we view health care reform is different,” he said. Some large employers are banding together, “creating coalitions among themselves and creating private exchanges,” said Marty Rosen, the chief marketing officer, executive vice president and co-founder of Plymouth Meeting-based Health Advocate. Those coalitions increase the businesses’ purchasing power and give them access to benefits they couldn’t afford alone, Mr. Rosen said, adding that rising health care costs might have produced those efforts even without the ACA. One of the Philadelphia area’s large employers, Independence Blue Cross, said it is embracing compliance with the ACA. The company implemented coverage for employees’ children up to age 26 before that change was required, extended dental coverage to that group, lifted exclusions on children under age 19 with pre-existing conditions, dropped lifetime limits on essential health benefits, and eliminated employee expenses for preventive health services and women’s preventive health care, said IBC’s senior vice president of human resources, Jeanie Heffernan.

“IBC is committed to the health and wellness of our associates,” Ms. Heffernan said in a statement. “IBC continues to offer our associates benefits that meet their needs while encouraging them to play a more active role in their health and wellness.” Another factor dulling the impact on large employers is that many self-insure, thus avoiding a new health insurance tax that insurers will pay on the premiums they collect starting in 2014. Scott Post, the vice president of corporate and association affairs at Independence Blue Cross, said insurers will pass that tax on to their customers, adding perhaps 2 percent to the cost of premiums. The exact increase is unknown for now because of the way the tax is calculated: The ACA sets an annual amount the tax must raise, from $8 billion in 2014 to $14.3 billion in 2018, and the federal government assesses each insurer a portion of that total based on the percentage of the national market that insurer controls. That “weird tax,” as National Small Business Association General Counsel David Burton called it, could accelerate a trend toward smaller employers choosing to self-insure. Traditionally, companies needed 200 or 250 employees to make self-insuring work, Mr. Viola said. “We’ll see that get down to about 100 employees because the law’s a lot more flexible on how they design plans and they don’t have to adhere to a lot of rules.” Self-insuring was unheard of for such small employers until a few years ago, Mr. Rosen said, but new plan designs offer enough checks and balances for it to work as long as the company has a good adviser and understands what it’s getting into. Mr. Viola expects self-insurance to jump in 2015 after employers experience the full impact of the ACA in 2014. Such a move would shift more of the burden of the tax on health premiums onto small businesses, which Mr. Burton said already are going to bear the brunt of the tax. Below 100 employees, businesses face significant ACA thresholds at 50 and 25 employees. Commonwealth Foundation policy analyst Elizabeth Selle expects a lot of businesses to avoid expanding so they can stay below 50 full-time employees and avoid the insurance mandate. “It’s a really tough decision for businesses right in that threshold,” Ms. Selle said, and it’s bad for the economy. “The last thing we want businesses to do is not expand because they’re fearful of additional

insurance costs.” Mr. Burton said “it’s Economics 101” that some employers will find creative ways to avoid reaching 50 full-timers. “An employer says, ‘I can reduce employees to part-time status and save that money.’ It might require the juggling of schedules, but there’s a big financial incentive,” he said. As a result, Mr. Burton expects a lot of lower-income employees, especially in the restaurant business, to be forced into part-time status. He said small-business owners want their employees to have health insurance, but they can’t handle the rapidly rising costs. The ACA “did not address the problem of escalating health care costs.” Mr. Viola, however, said none of his clients are talking about dropping coverage. “Employers buy health insurance to attract and retain employees,” he said. “The progressive employers are going to be maintaining their plans rather than dropping or going to exchanges. I don’t see a lot of movement in that direction.” Pennsylvania Health Access Network project director Antoinette Kraus said most small businesses in Pennsylvania have fewer than 50 employees, and small-business owners will appreciate the expanded options under the law because they “know how hard it is to buy health insurance for your employees.” But John Iatesta, who has about 40 employees at his sys-


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tem modernization consulting business, Information Assurance Professionals, said he’ll stay below 50 full-timers to avoid the must-insure level even though he provides insurance now. He’s unhappy that the federal standard for essential health benefits will add services he and his employees don’t use, such as chiropractic and mental health care. “I think the costs are going to be significantly higher than anybody can even see at this point,” Mr. Iatesta said. “I think maybe the intention was good for what they were targeting. I think the fallout is going to be significant.” Ms. Stelle said just the administrative costs of complying with the ACA’s 10 largest regulations will cost businesses in Pennsylvania $957 million over 10 years, according to an American Action Forum analysis. Mr. Iatesta said businesses have to make a certain return for their owners, stockholders or investors, and if costs soar for health insurance, the standard reaction will be to cut employees to restore that profit. He therefore fears significant job losses heading into 2014. “I have a myriad of friends that have businesses large and small, and most are saying the same thing.” Jeff Seidman has a different approach for his family-owned business in Fort Washington, East Coast Mortgage & Financial Services. He treats the money he spends on employee health insurance just like salary. When a new hire opts for health insurance, Seidman reduces that person’s starting salary by the amount the business spends on premiums. If the premiums rise sharply, the higher company cost could constitute those employees’ entire annual raise. “I don’t see it affecting the business profoundly,” Mr. Seidman said. “Any increase that comes across in premiums is going to be shouldered by the employees.” Only five of East Coast Mortgage’s 15 employees get insurance through the business, and all five are clerical workers. If those employees leave for better benefits, they’re easier to replace than the sales force, the company’s most valuable employees. “I might see it very differently if I had a bigger business,” Mr. Seidman said. Businesses like East Coast Mortgage that have fewer than 25 employees get special treatment under the ACA. Right now, if they provide health insurance, they’re eligible for an income tax credit of up to 35 percent of the cost of the insurance; that figure rises to 50 percent in 2014. Heaven & Earth Salon and Spa in Lafayette Hill is just below that cutoff with 22 regular employees. Owner Lisa Kasmen’s husband, lawyer Andy Kasmen, handles administrative matters and noted that the Kasmen family is part of the business’s health and dental insurance group. He said Heaven & Earth plans to continue the same coverage. Mr. Kasmen sees a lot to like in the Affordable Care Act, such as the extension of family coverage to children as old as 26, which has allowed some of the salon’s employees to stay on their parents’ insurance. He’s hopeful that the new rule forcing insurers to spend at least 80 percent of their premiums on health care will slow the price increases. “It truly becomes a prohibitive expense year after year,” he said. “In the last three years our premiums have gone up at least 30 percent, 8 to 10 percent per year; our revenues have not quite done that.” Ms. Kraus said the Harrisburg-based nonprofit Pennsylvania Health Access Network is itself a small business and has seen its premiums rise dramatically because just one person in the small group developed a serious illness. The ACA will resolve that problem by creating a statewide insurance pool and will allow small-business owners to shop around, she said.

she said Pennsylvania and the state’s hospitals can’t afford a rejection of the expansion, which is crucial to the law’s goal of dramatically decreasing the uninsured population. About three-quarters of the Pennsylvanians covered by the Medicaid expansion have family incomes too low to qualify for federal health insurance subsidies, which are available to those earning between 100 percent and 400 percent of the poverty level. More than 480,000 people below the poverty line thus would get no help under the ACA without the Medicaid expansion. Another twist, said Marty Rosen of Plymouth Meeting-based Health Advocate, is that there’s no way to know how many people will take advantage of the expanded Medicaid if it’s available. He said only 65 percent of Americans who are eligible for the current Medicaid program have enrolled, which is “an incredible number when you think about it — all of these people who are uninsured, people who are eligible for the exact version of health reform if they would call up the local, city or state government.” He also said the federal government set aside $5 billion to provide insurance to high-risk adults for a few years until pre-existing conditions stop being a factor in 2014, but a lot of that money hasn’t been spent. So don’t be surprised, Mr. Rosen said, if millions of eligible Americans remain off the Medicaid rolls. “People don’t understand this stuff. It’s not communicated to people affected by it in a tangible way to get people to apply.” As a result, estimates vary widely about how many of the 50 million uninsured Americans, including 1.3 million Pennsylvanians, will wind up with health insurance under Obamacare. The most common number is 30 million Americans who will gain insurance under the Affordable Care Act, but you can find estimates from 15 million to 40 million. Likewise, it’s hard to pin down a number in Pennsylvania. After 91,000 adult Pennsylvanians 26 or younger took advantage of the ACA to join their parents’ insurance, about 1.3 million residents of the state lack insurance. About half of them are eligible for the potential Medicaid expansion. About 10 percent earn more than four times the poverty level and are therefore ineligible for premium subsidies; the only financial incentive for them to get insurance is the tax penalty for being uninsured. An Urban Institute study estimated that 2 percent to 5 percent of Pennsylvania residents won’t get health insurance by 2014, Ms. Kraus said, but that assumes the state fully expands Medicaid. Some of the uncertainty about participation comes from the lingering questions about regulations. Until they know exactly what is required, insurers can’t design and price plans. “Our hope is by the end of the year we’ll have enough information in terms of benefits and rating rules to develop products,” Mr. Post said. “The sooner that clear guidelines come out, the better for everybody.” Without those prices, it’s hard to say how many people and businesses will prefer paying the premiums to paying no-insurance penalties. And not knowing how many people will participate in Medicaid and health insurance exchanges means not knowing how much those

programs will cost the state and federal governments or how much revenue the penalties will produce. “It’s not as simple as saying we just made coverage broader to cover a broader group of people,” Rosen said. “What happens when they start to calculate the costs and how that relates to other parts of the Swiss clock? They find out that pieces need to be adjusted,” he said. He said the insurance reforms in the law are important but don’t address the big issues going forward of the cost and delivery of services, so the law will have to evolve. “The whole premise is to expand coverage. … But the problem isn’t the lack of insurance; insurance is too expensive,” Stelle said. Ms. Kraus would like to see measures to reduce the cost of health care, but she said the ACA is a “great first step” to solve some of the coverage problems and move on to actual care. “I think we’ve seen when rolling out other programs, nothing is ever perfect,” she said. Jeff Seidman, who helps run family-owned East Coast Mortgage & Financial Services and its 15 employees, said the law is a step in the right direction, but he wishes it took more steps to control the higher costs of caring for an aging population. He said the law is packed with enough benefits to earn a place as a New Deal-style entitlement program that will never be repealed. “We think there are much better ways to reduce the cost of health care for Pennsylvanians,” Ms. Stelle said. “The Affordable Care Act just makes the current situation worse.” Opening the insurance market by removing mandates would make it more affordable, she said, thus reducing the number of uninsured people and creating a smoother-running, more efficient system. Mr. Burton said the National Small Business Association is preparing legislative proposals to address cost. He said the approach should include incentives for people to care about and shop based on price and for providers to compete on the basis of price. “In almost every market, food or housing or entertainment, people care about prices and they see prices,” he said. “In the health care market, price is almost never discussed.” John Iatesta, who has 40 employees at Information Assurance Professionals, agrees that health care reform is needed and wishes the ACA addressed tort reform to limit judgments in liability lawsuits. “I think the middle class is going to get creamed,” he said. Gloomy forecasts are nothing new for the Affordable Care Act. “Of all the worst predictions of the law’s opponents, from accelerating costs to government getting between patients and their doctors to Medicare crumbling, none have come true,” Ms. Sebelius said. For Ms. Burton, the time for predictions has passed, and the time for detailed answers about how this law will work has arrived. “It’s time to nail this stuff down.”


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ennsylvania has about 1.3 million residents without health insurance, and the Affordable Care Act aims to move most of them into the ranks of the insured by 2014. “The downside is not having enough doctors to take care of them,” said Bob Viola, the president of Conshohocken-based health insurance broker Megro. The math is simple: More patients without more doctors means more work for most doctors. The Hospital & Healthsystem Association of Pennsylvania says the state will have its share of a national shortfall of almost 63,000 physicians by 2015. President and CEO Carolyn Scanlan said the ACA is not responsible for an increase from a projection of a 39,600-doctor gap, but the law does increase the pressure to bring in more doctors. Elizabeth Stelle, a policy analyst with the Commonwealth Foundation in Harrisburg, does blame Obamacare for worsening the problem. The foundation cites a survey from a medical malpractice insurer that the law is making 43 percent of American doctors consider retirement within five years. “My family doctor doesn’t like it. I know it for a fact. He’s totally against it” because of the government involvement, said Andy Kasmen, who practices law in Bala Cynwyd. Marty Rosen, executive vice president and co-founder of Plymouth Meeting-based Health Advocate, also noted a problem in Pennsylvania with doctors not accepting new patients. “The first people usually impacted any time you have a fiscally tight situation are your providers,” Ms. Stelle said. The government cuts reimbursement rates so it’s no longer worth it to them to take Medicaid and Medicare patients. “The reimbursement is so low that they can’t function.” She said the access problem across Pennsylvania relates directly to “a quality of care that is frankly unacceptable,” and that quality will fall if patients must wait a month to get a doctor’s appointment. “Giving people a piece of paper … doesn’t fix the problem,” Ms. Stelle said. “Not adding doctors doesn’t result in good care. You get access to insurance, but access at what cost?” Access to primary care physicians is a particular concern because of the law’s emphasis on preventive and wellness care, including no co-pays for treatments such as blood pressure screening for adults, mammograms for women over age 40, annual checkups for children and flu shots for everyone. That’s not an issue that can be solved easily or quickly, Mr. Rosen said.

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DO WE HAVE ENOUGH

DOCTORS? More people with health insurance means a greater demand for doctors. The state was already facing a shortage, so the pressure is mounting to bring more doctors to Pennsylvania.

As an incentive, the law provides a 10 percent bonus through 2015 for primary care physicians treating Medicare patients or working in areas with a doctor shortage and raises the reimbursement rate for primary care physicians treating Medicaid patients to the Medicare rate. Like real estate, Mr. Rosen said, the access issue in Pennsylvania is all about location. Some areas have an undersupply of doctors, and others have an oversupply. Abbe Kligerman, the founder and owner of GetMeAHealthPlan.com in Conshohocken, said those pockets of oversupply are themselves a problem. She cited five places to get a mammogram within a mile of one another in Bryn Mawr as an example of excess capacity that drives up costs for everyone. “We’re a society where we want answers right away; we’re not willing to wait,” she said. The good news for the Philadelphia area, with its excellent medical schools and health care systems, is that waiting for doctors shouldn’t be a problem, said Donald Liss, a primary care physician and the vice president of clinical programs and policy for Independence Blue Cross. “At least in the insured population, we are not currently seeing shortages and the types of access pressure that we hear about elsewhere in the country,” he said, adding, “We anticipate the need for strengthening the primary care base. We’ve been doing that.” IBC has incentive programs to help primary care practices do a better job of delivering preventive and chronic care while being more efficient and supports efforts to increase doctors’ appreciation of primary care. “We are seeing an increase in professional recognition, but it’s a slow process,” said Mr. Liss, whose wife works as a primary care physician in the Philadelphia area. “I think it is being increasingly appreciated as a critical component to an organized health care system.” IBC is working with the residency programs in the Jefferson and Crozer-Keystone health systems and other hospitals to improve their specialty training, especially the primary care specialty, he said. “We’re teaching how to operate in a brave new world, if you will, in an organized way … to be sure Philadelphia is well-served by well-trained, professional doctors coming up through the ranks.” Mr. Rosen advised developing a relationship with a doctor now if you can instead of waiting until 2014. “It’s one thing to have a relationship with a doctor. It’s another at the last minute to find that doctors don’t have any availability.”


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Q&A

KATHERINE WILKINSON’S

LEGAL LEADERSHIP

The partner at Wilson Elser is about to become the sixth female Chancellor of the Philadelphia Bar Association. She’s bringing experience and determination to the job, along with an aggressive agenda.

What’s the elevator pitch for the Philadelphia Bar Association?

It’s the nation’s oldest bar association and the office of chancellor serves as a spokesperson for it’s 13,000 members on behalf of all attorneys. We were chartered in 1802 and, we are first a membership organization. We network and work together on issues of common interest. How does one become the chancellor?

In my case, it took lots of years of working on committees. To achieve this position, you must run for the position as vice chancellor. Then the next year, you move up to chancellor-elect, which is what I am this year, and then, finally, chancellor. You’re only the sixth female in 200 years to become chancellor?

It’s still a major accomplishment and I hope that it serves as proof that it’s possible for a woman to accomplish this goal. What initiatives are you hoping to roll out as chancellor?

One is the Chancellor’s Leadership Institute. The purpose is to develop the next generation of leaders in our organization. We’ll have a lineup of heavy-hitting speakers to help young attorneys learn the skills they need to succeed in this field. We still have a lot of work to do for female attorneys and minority attorneys, in addition to young attorneys. We need to do more to help them find the right field and the right firm and learn the skills they need to get their jobs done. We’ll also provide a lot of networking opportunities for them. Not everyone has the same goal, but they all need to learn basic skills to help them navigate their career. In addition, we’ll partner with the Coast Guard, which has a base at Penn’s Landing. They have hundreds of military personnel there, but no attorney, so we’ll provide pro bono work. We’ll also continue our existing programs and pro bono work. That includes the mortgage foreclosure diversion program where we work with families facing foreclosure, helping them work with special foreclosure judges to work out terms. What do you hope people will say about your term as chancellor?

I hope that they’ll be able to say that I made civility a priority, that I worked very hard to provide great leadership who provided good stewardship that allowed the organization to move to the next level. Anything else you’d like to mention?

I’d have to mention my family, including my three lovely children (Lindsey -23, Lauren - 21, Michael - 14) and my extremely busy husband, Tom Wilkinson, who’s also an attorney and is currently president of the Pennsylvania Bar Association until May 2013. Are your children following in their parents’ footsteps?

Lauren is currently in the first year of law school. The other two are [pauses for a moment] still undetermined.

Text by Region’s Business Staff Photo by Holly Clark

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29 NOVEMBER 2012

REGIONSBUSINESS.COM

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29 NOVEMBER 2012

REGIONSBUSINESS.COM

INNOVATION

33

Hire For Best Fit, Not Best Resume

R

Dr. Curtis L. Odom is Principal and Managing Partner of Prescient Training Strategists, LLC and author of “Stuck in the Middle: A Generation X View of Talent Management.” Learn more at StuckInTheMiddle.me.

CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.

ecruiters are the ones out there on the front lines of the workforce, trying to bring talent into organizations; there are a lot of qualified people out there from a credential standpoint. Fit is where the true challenge lies. Will this person fit our organization? There are many meanings to that. Does the person look and feel to others like they belong here? The answers to those questions play a huge role in the talent acquisition success. Unfortunately, recruiting and staffing is seen by the organization as an easy thing, as a lower level skill. On the contrary, it is probably one of the hardest things under the umbrella of talent management to find the right match of talent to the organization and the hiring manager that needs that talent. Organizations sometimes shy away from being very definitive about the type of person they want, commonly because they don’t want to be viewed as being biased in some way. Personally, I think this is erring too far on the side of political correctness. As a culture and a society, we’ve carried it way too far. One of the biggest things that frustrates hiring managers is that recruiters take too long to get the talent the company needs. In reality, the business doesn’t understand what the recruiter is doing. When the hiring manager says,“I need a human factors engineer. I want them to have 10-12 years worth of experience. I want them to have worked for one of the big five consulting firms. I want this person to be in the local area, because I’m not paying for relocation.” All of these unique factors not only shrink the candidate pool and restrict the options of what the recruiter has to work with, but also increases time to hire. I am sticking up for recruiters here and acknowledging that this is what they are faced with daily. Once the hiring manager says, “Do you have everything you need? You’re going to get me this person. Great. Thanks. Bye,” the clock starts for the business leader right then and there. In reality, the recruiter takes this information and has to create the job requirement if it doesn’t exist. That might take two or three days to write it, review it, post it, and start to field resume submissions from applicants. It might be three weeks or a month before the recruiter even starts to get candidates in for interviews from when the posting went up based on conversations with the hiring leader. The hiring leader is ticked off. “It’s been two months. Where is this person I need?” Without constant contact from the recruiter back to the hiring leader, the hiring manager doesn’t know

Corporations and organizations over a 20-year period have had to resign themselves, to hire and replace, hire and replace. If you don’t have talent management that gives Gen Xers comfort enough about their career with your organization, they will go elsewhere, and you will consistently hire and replace, hire and replace. A properly structured talent management strategy such as a “talent farming” strategy can dramatically cut the cost of that impact and can YOU CAN’T DO guarantee you, perhaps, a seven-figure MORE WITH LESS savings over the long run to the company in recruiting and staffing agency costs. IF THE PEOPLE There are serious questions that comTHAT YOU’VE GOT panies and organizations must now ask DO NOT themselves, “Do we want to continue to HAVE THE muddle along with this talent manageCAPABILITY TO ment thing and have things remain the same?”, “Do we want the Board of DirecPULL IT OFF. ’ tors to continue to kick us to get a plan in place?”, “Do we want to put the company the particulars of the situation, or what goes on into the position where the next time that there’s behind the curtain. They think, “Next time I’ll an economic downturn, which there will be, or hire an outside agency so I can get this done in the competition has a decided advantage and less time!” we’re losing market share we can compete?”, “Do Unfortunately, that’s what happens to internal we want to invest in ‘talent farming’ now so that recruiters. They are out there with a flashlight in we can have the best talent in house to deal with the middle of the daytime trying to find some- whatever organizational challenges come next?” one’s shadow. They’ve been given this exacting If not, then they will just stay the same. Admitdescription of what skills they need to find but ting that they are not willing to address the hard they have not had time to get a head start on try- questions. Admitting that they are not willing to ing to find that person. And they get very little step into the unknown and do things differently. respect or thanks when they do find the needles Admitting that this would require people that in the haystack. are self-driven, that have self-confidence, that We’re coming to a point where things are going are willing to get out there and lead. to stabilize, because nothing lasts forever — even Don’t continue down the path of trying to the downturns, even the bad times. We’re going figure out what accommodates your need to feel to reach a point of stability. And when that does comfortable, but is in opposition to the desire to happen, you will find a lot of organizations that get a result. Because sometimes, you have to get are going to start to think differently. They’re not uncomfortable to get the result you want. You going to ever want to return to talent firefight- have to go through a period where it’s going to ing, and they’re going to turn to thinking, “We be downright ugly as you shake things up, break never want to go through that again. We want things down and build them back up stronger. A to at least be able to mitigate our exposure to the sustainable, proactive approach to talent manwhims and vagaries of the markets and econom- agement is the organization’s displayed willingics.” The only way to do that is to literally have as ness to make lasting cultural change. lean and as flexible an organization as possible. Talent management is about sourcing canThat means do more with less. To do more with didates for knowledge, skills, and abilities to less, you have to have top talent and processes to accomplish the organization of today’s goals. It enable that talent to do their jobs while pioneer- stresses the importance of hiring based on the ing a new paradigm. right fit for the individual and the organization. You can’t do more with less if the people that Being stuck in the middle between having you’ve got do not have the capability to pull it off. employees who are able to do the job, and in a The best way to find those people is to grow them. place where they can do the job well is someYou can’t hire them; because if you hire them that where many organizations often find themselves. means that you had to go out and poach them, However, many are learning to recognize the which costs money and is not a long-term solu- warning signs, and know now how important it tion to a recurring problem. is to get it right when hiring for the best fit.


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29 NOVEMBER 2912

REGIONSBUSINESS.COM

CHAMBER REPORT

PACT

PHILADELPHIA

PHILADELPHIA CONVENTION AND VISITORS BUREAU

PACT To Hold Healthcare IT Luncheon

‘ThinkFest’ Will Highlight City Innovators

Bureau Launches New Campaign; Mayor Plans China Trade Mission

The Greater Philadelphia Alliance for Capital and Technologies (PACT) will host a Healthcare IT luncheon 11:30 a.m. to 1:30 p.m. November 29 at the Radnor Hotel. The panel for the event — “Megatrends & Healthcare IT: Brave New World or More of the Same?” — is moderated by Tom Olenzak of Independence Blue Cross and will focus on how small companies can approach the priorities of big health care buyers. Registration is now open at PhiladelphiaPACT.com. For more information, email Jennifer Cohen at jcohen@ philadelphiapact.com.

ThinkFest — a series of presentations, Q&As and discussions featuring Philadelphia’s boldest thinkers on technology, arts, food, medicine, economics, and development — will be held Friday and Saturday at the Center City Rittenhouse Hotel. Speakers include television news anchor Jim Gardner, urban planner Stephen Starr, Center City District CEO Paul R. Levy and University City District Executive Director Matt Bergheiser. Registration is open at $85 for both days and $50 for a Saturday-only pass.

The Philadelphia Convention and Visitors Bureau presented a new campaign to package Philadelphia as a modern renaissance city to about 500 members of the region’s hospitality community at its annual luncheon November 21. The campaign, which includes a booklet, a threeminute promotional video and a new set of initials (PHLCVB) for the bureau, was tested with focus groups and created with partners that included City Hall, local businesses, restaurants, and universities. PHLCVB has a stagnant budget of

$11 million a year and the challenge of selling space at the newly expanded Convention Center against international competitors. About 40 percent of city convention participants and exhibitors currently come from overseas. Jack Ferguson, PHLCVB president and CEO told The Philadelphia Inquirer he plans to target “the Brazils, Chinas, and Indias,” because “each has a rising middle class, and they’re very interested in Western culture.” The campaign has been officially endorsed by Mayor Michael A. Nutter, who leaves Thursday on a trade mission to China.

35

QUOTABLE China presents huge investment and export opportunities for Philadelphia and I intend to be very aggressive in promoting our city and attracting new investment, all of which ultimately leads to more job opportunities for Philadelphians. My message for this trip is that Philadelphia — increasingly recognized as an international leader on sustainability, healthcare, education and the creative economy — is ripe for investment and open for business. MAYOR MICHAEL A. NUTTER


36

29 NOVEMBER 2012

REGIONSBUSINESS.COM

OPINION

Field Already Taking Shape For 2014 Governor’s Race P

Politically Uncorrected™ is published by G. Terry Madonna (above) and Michael L. Young (below) twice monthly, and previous columns can be viewed at http://politics.fandm.edu.

ennsylvanians might reasonably expect that the political world would take a breather from campaigns following almost two years of non-stop presidential campaigning. After running nationally more than one million commercials and spending an estimated six billion dollars, everyone should be ready for a rest. Silly you! In fact, the next political campaign is already underway — it started the day after the presidential election. We speak, of course, of the already frenzied maneuvering for position in the Keystone state’s upcoming 2014 gubernatorial election. For the first time in modern times, an incumbent governor is all but certain to face serious opposition for re-election to a second term. Some of it might come from his Republican party; more of it will likely come from opposition Democrats. Without further ado, these are the names most likely to surface in the next several weeks and months as Pennsylvania prepares to elect its next governor.

Republican Candidates

CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.

Tom Corbett: Corbett enters the race as the weakest incumbent for re-election since 1970 when governors became eligible to run for a second term. His job performance numbers in many recent polls are in the mid 30’s and his budget cuts have drawn heavy fire from both Democrats and Republicans. Moreover, some blame his political leadership for the Republican Party’s poor statewide showing in November’s election. Compounding the governor’s problems is the debate over his handling of the notorious Sandusky investigation while he served as attorney general. The incoming attorney general has promised a thorough review of that case. Yet, for all this trouble, Corbett still is arguably the favorite in 2014. As incumbent, he commands enormous organizational, financial and political resources to support his re-election. In addition, Pennsylvanians seem to prefer electing governors from the party out of power in Washington. Corbett’s Possible Opponents: The GOP’s prospect of losing control of the governorship raises the possibility incumbent Corbett will draw a primary opponent. The

question is who might actually do it. After November’s election, there are no Republican statewide office holders available to launch a possible challenge. Consequently, the most likely Corbett opponents would be state lawmakers, including perhaps the Majority Leader of the state House, Mike Turzai or the Majority Leader of the state Senate, Dominic Pileggi or chair of the Senate Appropriations Committee, Jake Corman. But legislative gubernatorial candidacies historically have been problematic even in open seat races. Outside possibilities – Other GOP possibilities are sparse. No incumbent Republican congressman is likely to challenge Corbett and the big city mayors are Democrats. One outside possibility is the emergence of an independently wealthy “outside” challenger as we have just seen in the U.S. senate race. But more likely, Corbett gets a “pass” free from serious opposition and an unobstructed path to renomination.

Democratic Candidates Moving from possible Republicans to possible Democrats, the list grows exponentially. Not a few Republicans worry that Corbett could be defeated, but far more than a few Democrats are certain of it. At least 12 Democrats are potential Corbett opponents, and the number could grow. Here, in no particular order, are those now believed to be among the strongest contenders. Ed Rendell, former governor, current pundit and sports commentator. Few doubt that Rendell would be a formidable opponent in 2014, but he has consistently ruled himself out. Rob McCord, incumbent state treasurer, prolific fund raiser, skilled campaigner and possibly the favorite of the Democrat establish-

ment. His largest handicap now is probably lack of statewide name recognition. Kathleen Kane, newly elected attorney general, proven campaigner, one of the more exciting political figures to emerge on the state scene in many years. Her inexperience in state politics might be her biggest challenge, and she would be in office only a few months before announcing. Former congressman Joe Sestak, darling of state progressives, an impressive, impassioned campaigner and proven fund raiser. Sestak’s U.S. Senate loss in 2010 may hurt him, but he brings considerable assets to the race. U.S. Senator Bob Casey, the son of a popular two term governor, now twice elected to the U.S. Senate, and a grass roots favorite among rank and file Democrats. Casey seems highly unlikely to run. If he did run, however, he would prove difficult to defeat. Josh Shapiro, current chair of the Montgomery County commissioners, draws high marks because of his leadership in the state’s third largest county. He is widely recognized as a future statewide candidate, but his youth probably means he waits a few years more. To this “A” list of potential Democrats can be added additional prospective candidates either less likely to run or somewhat less likely to win. Among this group is Congresswomen Allison Schwartz, Philadelphia businessman Tom Knox, state Senator Daylin Leach, Philadelphia Mayor Michael Nutter, Allentown Mayor Ed Pawlowski, Auditor General elect Eugene DePasquale and former gubernatorial candidate Dan Onorato. This is the preliminary lineup for both parties. Two years is several lifetimes in politics and much can change between now and November 2014. What’s unlikely to change, however, is that Pennsylvania is poised to have its most spirited gubernatorial re-election campaign in more than half a century.


29 NOVEMBER 2012

REGIONSBUSINESS.COM

OPINION

37

History Shows Odds Against Controlling Obamacare’s Costs

P

resident Barack Obama’s victory all but ensured that his healthcare reform package - Obamacare - will be fully implemented. Beyond that, the details are, at best, murky. The details, of course, are what will determine the eventual success or failure of the sweeping healthcare reform. On the surface, it’s tough to argue against the fundamentals - making sure all Americans have health insurance, eliminating overpayments in Medicare, etc. But the details will help clarify the pricetag for the reform. Details will also make clear the impact on businesses, insurance providers, insurance brokers and all other stakeholders. There are plenty of detractors who believe the details will be a morass of red tape and, eventually, red ink that will eventually cripple the economy while swelling the already burdensome national debt. Those naysayers have history on their side, because the federal government has shown a propensity for excellent ideas and less-than-excellent execution. The best examples are the three biggest expenditures in the federal budget. Social Security. Given the condition of the U.S. economy during his tenure, Franklin D. Roosevelt’s New Deal seemed like a no-brainer. No need to go into elaborate detail, but it has mush-

roomed into the largest government program in the world. National Defense: This is the country’s second-largest expenditure and while it’s hard to argue about the world’s most effective military, it’s also hard to argue that defense spending has mushroomed over the past few decades. Medicare and Medicaid: This is the country’s third-largest expenditure and another example of a federal government bureaucracy bloating beyond hope of efficiency or effectiveness. Report cards on the massive federal bailouts of the banks and the nation’s auto industry are still being written, but it seems clear that the government’s track record on large entitlement programs leaves something to be desired. That is not to say that Obamacare will be a failure or end up costing billions more than it should. While history tells us that will likely be the outcome, there is still time to work out the details in a way that will prevent that from happening. With re-election, the president earned the right to implement his signature legislation. For their part, the Republicans retained control of Congress, with the clear expectation that they will not allow Obamacare to become another bloated bureaucratic money pit. Can both parties take the long view on the details? History will be the final judge.

COMMENTARY FROM ACROSS THE WEB

Union recipe killed Twinkies

Beware ‘deal’ on fiscal cliff

Thousands of bakery workers are out of a job. Hundred-dollar Twinkies pop up on eBay. Unless today’s unions want to see more of this kind of thing, they may want to try a new recipe.

If a “deal” is reached it will probably be more of the same: Higher taxes and a debt ceiling increase now purportedly offset by spending cuts that would go into effect the next time Halley’s Comet swings through the neighborhood. Instead of a plunge from the fiscal cliff we’ll probably end up getting another Triple Lindy into economic oblivion.

EDWIN J. FEULNER, THE HERITAGE FOUNDATION 19 NOVEMBER 2012

Pa. must repeal pay raise law As many people continue to struggle with rising expenses coupled with stagnant pay, it isn’t right that lawmakers get an automatic pay raise. This is especially true given that the last few state budgets have been difficult ones to balance and meant deep cuts for programs that help our neediest citizens. Lawmakers need to repeal the law that gives them the yearly boost. THE PATRIOT-NEWS EDITORIAL, 26 NOVEMBER 2012

REGION’S BUSINESS A JOURNAL OF BUSINESS AND POLITICS © COPYRIGHT 2012 INDEPENDENCE MEDIA 600 GERMANTOWN PIKE, SUITE 400 PLYMOUTH MEETING, PA 19462 610.940.1656 | WWW.REGIONSBUSINESS.COM

EDITORIAL BOARD CEO and President James D. McDonald Editorial Director Karl Smith Associate Editor Terrence Casey

DOUG POWERS ON MICHELLE MALKIN.COM 26 NOVEMBER 2012

Corbett wrong on Medicare Pennsylvania’s higher Medicaid tab wouldn’t come due until late in the second term that Gov. Corbett clearly intends to seek. Even so, the governor last week said he didn’t think the state could afford the additional $178

@oflynnexpress [Chief Political Commentator, Daily Express, London]

If the private insurance industry can’t cope with flooding, how the hell do people think it could ever cope with universal healthcare? 26 NOVEMBER 2012

million. That shortsighted view is in keeping with his unworkable no-tax pledge to tea-party elements of the Republican Party. PHILADELPHIA INQUIRER EDITORIAL 25 NOVEMBER 2012

HOW TO CONTRIBUTE To contribute, send comments, letters and essays to feedback@regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business. We reserve the right to edit all submissions for content, style and length.


ho ed

ho dy e

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29 NOVEMBER 2012

REGIONSBUSINESS.COM

BY THE NUMBERS

49

Number of homes sold in the 19146 ZIP code (Grays Ferry) in September, the most of any ZIP code in the city.

$134,000,000,000 Annual nationwide payroll loss from employees spending work time on tasks that aren’t work-related.

10%

People directly employed by Drexel University.

$68M

11

Amount paid annually by Drexel University in local and state taxes.

Number of games in the Philadelphia Eagles longest season-ending losing streak. The 1936 season started with a win followed by this streak. The 1937 season started with three losses, making the total losing streak 14.

47%

Number of Philadelphia Eagles players, including rookie quarterback Nick Foles, to wear number 9.

69,144

Attendance for the EaglesPanthers Monday Night Football game on November 26. That matches the Eagles average home attendance number through six of eight home games. The Eagles rank 15th of 32 teams in home attendance. Dallas tops that list at 87,646 per game and Tampa Bay is at the bottom, averaging 54,057 per game.

Drexel University’s economic impact in the city of Philadelphia according to a study by eConsult Corporation.

$

9,500

Percentage of Philadelphia’s Section 8 housing residents that live in Grays Ferry; less than 1% of the city’s overall population lives in that neighborhood.

13

$1.5B

Percentage of workers who say that meetings are among the biggest time wasters in their office. Meanwhile, 18% said the internet was among the biggest time wasters and 37% pointed to fixing others’ mistakes as a major time waster.

35%

Percent of employees who say they waste time at work because they are not challenged enough. Meanwhile, 18% said they wasted time because they are underpaid and 32% said they wasted time because there was no incentive to work harder.

46%

Percent of employees who say that they’ve spent time looking for other jobs while at work.

$1,100,000,000 Weekly costs to businesses from employees spending time tending to their fantasy football teams.

8,000,000 Employee hours spent watching the NCAA men’s basketball tournament while at work.

60%

The percentage of workers who visit non-work related websites during work hours.

41%

Percentage of workers who said that if they visit non-work related sites during work, spent time on Facebook; 37% cited LinkedIn, 25% cited Amazon.

33%

796

Number of tickets given for texting-while-driving in the first six months of Pennsylvania’s new law, according to AAA.

355

Percent of workers sho say that Facebook and Twitter are blocked at work.

Number of tickets given for texting-while-driving in the five-county Philadelphia region during those six months.

60%

156

Percent of workers who would use smartphone, tablet or laptop to access blocked sites at work

WORKPLACE DATA: BOLT INSURANCE

Number of tickets given for texting-while-driving just in Philadelphia county during those six months. That represents 19.6% of the entire state total.

P

T


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Region's Business 29 November 2012