Ascension could shift away from hospital focus, Modern Healthcare finds

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Dive Brief:

  • Ascension is restructuring to adapt a new strategic direction. President and CEO Anthony Tersigni hinted that direction would put a larger emphasis on outpatient access points and telemedicine, according to a video obtained by Modern Healthcare. The effort could move Ascension away from being a hospital-focused business.
  • The board of directors has endorsed the new direction and the company expects to save $57 million a year by streamlining its pay practices, Tersigni reportedly said in the video.
  • The 151-hospital system has realigned leadership and organizational efforts, including limiting business travel and holding virtual meetings as Tersigni and his direct reports take pay cuts. Such efforts are expected to save $61 million in fiscal 2019, Modern Healthcare’s Alex Kacik reported.

Dive Insight:

The news comes as the industry is questioning whether the days of large hospital-based health systems are numbered.

Tenet Healthcare and Community Health Systems are both shedding hospitals as they seek to reduce debt loads that were $15 billion at their peaks. Tenet, also in restructuring mode, raised its number of layoffs to 2,000 to help reduce its debt.

Ascension recently laid off 500 workers in Michigan and more could be on the way. It’s restructuring shouldn’t be a surprise. The company’s operating income dropped 93% in Q1 2018 to $11.5 million, compared to $172.6 million the previous year. The operating revenue dropped $122.1 million over the last half of 2017.

Admissions for many health systems have been trending downward as expenses have risen. In efforts to make numbers work, health systems are exploring outpatient access points while focusing on geographic areas they believe they can become market leaders in and where higher-revenue-yield services are more in demand.

This has led to large systems questioning whether they want to still be large.

However, no one is waving the white flag just yet and pivoting away from a “strength by numbers” system approach. The restructuring news comes as Ascension and Presence Health signed a definitive agreement for Presence to join Ascension and become part of AMITA Health, a joint venture between Ascension’s Alexian Brothers Health System and Adventist Midwest Health.

The system is also rumored to be in merger talks with Providence St. Joseph Health that surfaced in December.

HCA, which is bullish on inpatient facilities and saw rising admissions last year, is exploring a possible acquisition of Mission Health.

The industry is in a state of change, and it’s yet to be seen how the multiple restructurings shake out. But smaller, regional-focused systems look to be one option as the large systems sell parts of themselves off.


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