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Welcome to the major leagues of debt. Collateralized debt obligations, almost always referred to as a CDOs, are horrendously
complicated deals that often leave anyone without a MBA wondering what was put into these CDOs.
The first thing to
understand about bonds, (aka debt) is that bonds are often backed by something else. Think about your home mortgage. If you
don't pay your mortgage, the bank can take the house. You end up homeless, and the bank sells the house to pay off the rest
of that mortgage. There is something "backing" that mortgage; something lender can fall back on, if you don't pay your bills
like a good human being. That's called collateral.
CDOs are one flavor of an entire sector of investing called structured
finance, and they are also backed. CDOs, in the simplest concept, are just bonds backed by something else. In most cases,
a CDO is backed by a collection of various types of debt. CDOs can be home mortgages, or other types of debt like credit cards,
auto loans, and personal loans. Most of these types of debt are usually considered a bit more risky and they don't have the
backing that a home loan does. So, if you think it through, you can imagine that CDOs are usually considered a risky investment.
To take a step further, understand that CDOs have multiple flavors within each CDO. These flavors are called tranches. If you've taken French, you might recognize the word, it means "slice" or "portion." Each slice of that CDO you invest in is a little different and carries different amounts of risk.
You could invest in the lowest risk tranche of the CDO, which would
provide you lower risk. But, you don't get a good return on that investment. Or, you can be the heroic adventurer of bonds
and invest in the lowest-grade tranche of the CDO. You'll make an amazing return, but if the economy even looks at you wrong,
you might lose the entire investment.
CDOs aren¿t easy, and are almost always invested in by mutual funds, insurance
companies and hedge funds. As an individual investor, you will probably not come across a CDO you can participate in.
Home / Markets / Industries / Health Care
Friday, June 20, 2008
State Acts to Delay as Pharmacy Lawsuit to Stop the 10 Percent Medi-Cal Provider Cuts is Moved to Federal Court
Comtex
SACRAMENTO, Calif., Jun 20, 2008 (BUSINESS WIRE) ----The Schwarzenegger Administration, in an eleventh hour move, took action to delay a hearing on a temporary restraining order (TRO) sought by eight retail community pharmacies to stop the ten percent Medi-Cal provider cuts from taking effect on July 1, 2008. On June 9, 2008, eight California pharmacies filed an action in state court seeking to restrain DHCS from implementing a ten percent reduction in pharmacy reimbursements for prescriptions dispensed to Medi-Cal beneficiaries. Pharmacies demonstrated in their complaint that the effect of these cuts going into effect on July 1 would be catastrophic to the state's Medi-Cal program and the over 6,500,000 California residents who rely on Medi-Cal for life saving prescriptions.
The Department of Health Care Services (DHCS) and its Director Sandra Shewry petitioned to have the lawsuit moved to federal court following the release of a tentative ruling by the judge in the state court that reflected his willingness to hear the arguments on both sides in the case. The pharmacies claim that the State's move is unwarranted because the lawsuit focuses entirely on DHCS's compliance with California law.
The law in question requires DHCS to "promptly seek any necessary federal approvals for implementation of (the 10% cut)," which in turn requires California to file with the federal Centers for Medicare and Medicaid Services (CMS) a State Plan Amendment to implement the 10% cuts or take other action. DHCS makes no claim that such approval has been sought. The State Plan is a comprehensive written statement prepared by DHCS, which both describes the nature and scope of the Medi-Cal program and gives assurances that DHCS will administer the plan properly.
"We are sorely disappointed with what appears purely to be a delay tactic by the State and believe DHCS had no basis for the removal," said Lynn Rolston, chief executive officer of the California Pharmacists Association. "It seems the State is afraid to have these issues heard by California courts. We believe the pharmacies that filed this action will seek an immediate remand to state court for a hearing on the merits. There are two other lawsuits pending in federal court as a result of similar action by DHCS. We are confident that all of these cases present strong legal arguments for stopping these draconian ten percent provider cuts."
Attorneys for the pharmacy plaintiffs have prepared a motion to remand the action back to the state court and hope to have their motion for a TRO heard next week. Despite these efforts, Rolston fears that the cuts may be implemented on July 1. "This could result in tragic consequences for pharmacy and the patients they serve," she said.
A recent report showed that if the ten percent Medi-Cal provider cuts are implemented, pharmacies will be faced with tough decisions including turn away new Medi-Cal beneficiaries, stop accepting Medi-Cal altogether or going out of business. Independent and rural pharmacies will be hardest hit, forcing chain pharmacies to pick up a larger portion of the Medi-Cal population. As part of the domino effect, chain pharmacies will feel the strain and might cope with reduced revenue in other ways, such as cutting staff and hours, which would mean longer lines and slower service for everyone.
The eight pharmacies involved in the lawsuit are Farmacia Remedios, Inc., Ross Valley Pharmacy, South Sacramento Pharmacy, Horton and Converse Pharmacies, Zweber Apothecary, Komoto Pharmacy and Medical Pharmacy, Pucci's Leader Pharmacy and Gregg's Pharmacy vowed to continue the fight to seek a permanent injunction against the ten percent Medi-Cal provider cuts.
SOURCE: California Pharmacists Association
for California Pharmacists Association Bill Bradley, 916-658-0144 bill@perrycom.com
Copyright Business Wire 2008
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