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Ongoing issues continue to challenge business, consumer services in 2008

The business and consumer services industries will turn their calendars over to a new year but not without leaving behind the concerns of the past 12 months.

Many of the future challenges the health care, insurance, accounting and retail industries will face have been ongoing business trends from years past. 2007 brought natural disasters, changes in industry standards and proposals for reform, which will affect the coming year.

While the 2008 presidential election will be paramount to the national health care industry, the past year has seen a number of proposals put forth at the state level to address the growing number of uninsured and rising costs.

Steven Escoboza, president and CEO of the Hospital Association of San Diego and Imperial Counties (HASDIC), said health care reform, work force shortages, overcrowding of emergency rooms and underpaid reimbursements are challenges the industry will continue to face in the upcoming year.

The number of people in the country without health insurance coverage rose from 44.8 million (15.3 percent) in 2005 to 47 million (15.8 percent) in 2006, according to the U.S. Census Bureau. In the most recent San Diego County Healthcare Safety Net Study conducted by The Abaris Group, the uninsured accounted for 15.2 percent of the county population (463,415 people) in 2005.

As a result, Escoboza said there has been "a continual onslaught of the emergency department." There continues to be a work force shortage of nurses as well as allied health care professionals, said Escoboza. Tom Gehring, CEO and executive director of the San Diego County Medical Society, said the physician shortage in particular is "not intuitively obvious" because of the asymmetric nature of the profession's geography and specialty.

Reimbursement rates are becoming more of a challenge in the health care industry, because they are not adequate, according to Escoboza. He said the industry is seeking "fair covering of costs of services provided to Medicaid population."

Escoboza added HASDIC is "committed to push for that in the next year."

Although the October wildfires have subsided, the insurance industry will continue to deal with the aftermath of the disaster for a couple of years or more, according to David Creedon, president of the San Diego Insurance Adjusters Association.

Creedon said the industry had a profitable year and will probably carry on into 2008 as residents continue to deal with fire-related claims.

Also in the next year, California residents can look for a change in their auto rates. Allstate Insurance Co., which has more than 2 million customers in the state, announced it filed for an auto rate reduction with the state Department of Insurance earlier in the year. The motion is currently before an administrative law judge.

Peter DeMarco, senior corporate relations manager for Allstate, said the company expects a recommendation to be made mid-February.

"When a large carrier like Allstate does something like this, often times other carriers will follow suit, much like airfare wars in the airline industry," DeMarco said.

Industry trends are difficult to foresee, Creedon said, as the most prevalent pattern is the expansion and contraction of insurance businesses. As a result, companies in the industry are now looking toward regionalization of claim services and are going back to satellite offices in the upcoming year, according to Creedon.

He also said AIG (NYSE: AIG) is becoming a bigger presence in the county. However, he added, "I don't see San Diego drawing any other hubs here."

This is true for the accounting industry, which will not see far-reaching changes in 2008. According to Barry Kohn, the immediate past president of the CalCPA San Diego Chapter, an industry group for Certified Public Accountants, not much is going on in the accounting industry other than issues carrying on from year-to-year.

The Small Business and Work Opportunity Tax Act of 2007, which was signed into law in May, has return preparer penalty changes that will affect taxpayers and practitioners. According to the American Institute of Certified Public Accountants, changes include increased penalty levels and higher standards, which are applied to more returns.

Kohn said the industry could also find the mobility issue of public accountants certified in one state practicing in another area raised in the upcoming year. California currently allows other states to come in for a temporary engagement, while other states charge a fee.

The California Board of Accountancy also wants more mandatory peer review, which would better the profession and lessen mistakes, Kohn said.

One of the biggest trends in the profession is going online as the industry moves toward becoming paperless. "From now on when you deal with CPAs, it's all going to be online," Kohn said.

2008 begins with traits of a weak housing market, high gas prices and low consumer confidence -- all current challenges of the retail industry.

Fitch Ratings' outlook report, "Weaker 2008 Will Force Back to Basics Strategy," anticipates "comparable store sales growth in 2008 will be weaker than 2007 levels due to slow U.S. GDP growth, which Fitch forecasts to be about 1.7 percent in 2008, versus an expected 1.8 percent in 2007."

George Whalin, president and CEO of Retail Management Consultants in Carlsbad, said, "The good news is jobs seem to be holding up."

The retail industry is not a business that sees abrupt changes unless there are cataclysmic events, according to Whalin. Even then, he said, it is usually short term.

Although sales may be "tepid" in the coming year, Whalin said he does not see any major impacts.

The county welcomed its first Fresh & Easy neighborhood market store in 2007, and Whalin said people may begin to see more of these stores in the next year. In June, Tesco, Britain's biggest supermarket group, said seven sites in the San Diego area have been secured and additional locations are being researched.

Also, Westfield plans to begin updating its seven county properties beginning with the revitalization of the UTC shopping center, a $900 million investment plan that would add about 750,000 square feet of new space.

Aside from these additions, Whalin said there are "no big shifts or changes in the retail landscape in San Diego."

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