Securitization of Health Care Receivables

Abstract

In the early 1990s, the Italian National Health Service was characterized by excessive centralization and consequent lack of accountability for expenditures by local agencies. Subsequent reforms transferred a significant degree of financial responsibility and a role in program creation to the regions, but holding local health care units accountable for expenditures while maintaining quality of service remained a challenge. The region of Lazio has been at the forefront of the innovative use of financial techniques. Lazio has: 1) increased efficiency by centralizing purchases for certain bulk items and establishing controls on costs related to public and private providers, 2) issued asset-backed securities (ABS) backed by outstanding transfers from the central government, 3) securitized leases resulting from sale and leaseback of its hospitals, and 4) securitized past-due receivables on the books of various suppliers from the region9s hospitals and local health authorities through Atlantide Finance, a special-purpose vehicle. Securitization of health care receivables has helped suppliers collect their payments sooner and provided a valid alternative to traditional ways of discounting notes in the Italian system. At the same time, such securitization has allowed the region the possibility of postponing debt payments to suppliers, the avoidance of interest payments, relief from legal actions brought by suppliers, and a reduction of payment delays. <b>TOPICS:</b>Asset-backed securities, developed markets, exchanges/markets/clearinghouses