Author Archives: henrykotula

Non-operating income helps Providence claw back into black for 2020

Posted on by • Posted in Health System, Hospital, Hospital Industry, Market Outlook, Market Trends, Net Income, Non-Profit Healthcare Industry, Nonoperating Income, Operating Expenses, Operating Income, Operating Margin, Operating Metrics, Operating Performance, Operating Revenue, Pandemic • Leave a comment

https://www.healthcaredive.com/news/non-operating-income-helps-providence-claw-back-into-black-for-2020/596370/

Dive Brief:

  • Though the COVID-19 pandemic hampered Providence’s operational performance in 2020, the regional nonprofit powerhouse still ended the year in the black with net income of $1 billion, down about 9% from 2019.
  • Providence ended 2020 with an operating loss of $306 million, compared to an operating income of $214 million in 2019. However, healthy non-operating income recouped operating losses and offset reimbursement shortfalls from Medicaid and Medicare coverage, Providence said in full-year financial results released Monday.
  • The system, which operates 51 hospitals spanning seven states, posted drastic net losses in the first half of 2020 due to the pandemic, but seems to have closed out the year on more stable financial footing though volumes remain down.

Dive Insight:

Like other major systems, the pandemic railroaded Providence’s operational performance in 2020, as state and local lockdowns and orders to pause non-emergency procedures contributed to an unprecedented drop in patient volumes starting in March. As a result, the West Coast system reported a significant dip in patient revenue, along with skyrocketing expenses for personal protective equipment, pharmaceuticals and labor.

Volumes as measured by adjusted admissions were down 9% for the fiscal year ended Dec. 31, Providence said. Despite the lower volume, operating revenues were actually up 3% year over year to $25.7 billion, driven by growth in capitation, premium and diversified revenue streams — and supported by the recognition of $957 million in federal COVID-19 grants to providers from the Coronavirus Aid, Relief, and Economic Security Act passed a year ago.

However, operating expenses climbed 5% year over year to $26 billion, resulting in ​operating earnings before interest, depreciation and amortization of $1.1 billion, compared with $1.6 billion in 2019.

Overall, Providence’s financial results suggest the system was able to sidestep the worst of the pandemic’s financial effects, and mirrors 2020 reports from other major nonprofits.

Kaiser Permanente, which reported in early February, was also able to stay in the black despite COVID-19 deflating operating and net income, which fell about 19% and 15% respectively from 2019. Similarly, nonprofit Mayo Clinic reported a shrinking bottom line, with net income down almost 24% from 2019 though it remained profitable.

California-based nonprofit Sutter Health also squeaked to overall profitability in 2020 despite a operational loss of $321 million. The system, which said it expected to take several years to fully recover from COVID-19, launched a systemwide operational and financial review as a result of its weak operational performance.

For-profit operators weathered similar headwinds and were able to turn a profit in 2020, including Universal Health Services, HCA Healthcare, Tenet and Community Health Systems.

A number of hospital executives have called out CARES grants and other federal aid as a key help in turning their finances around in 2020. However, despite the pandemic’s financial pressures, numerous major operators, including Kaiser Permanante, Mayo Clinic and HCA said they would return all or a portion of congressional aid, even as powerful hospital lobbies call on Washington for additional funds.

A recent Kaufman Hall report suggests providers could be overwhelmed by ongoing COVID-19 expenses following a surge in cases over the winter. Researchers estimate hospitals could lose anywhere from $53 billion to $122 billion in revenue in 2021 if pandemic pressures don’t abate, despite the glimmer of hope brought by ongoing vaccination efforts.

Despite increasing distribution of coronavirus vaccines, Moody’s Investors Service has placed a negative outlook on nonprofit hospitals in 2021.

Providence came together in 2016 with the merger of Washington-based Providence Health & Services and California-based St. Joseph Health to create the nation’s fourth-biggest Catholic hospital chain. Its full-year earnings come a week after California Attorney General and Biden nominee for HHS Secretary Xavier Becerra disclosed his office is investigating whether Providence violated legal commitments in applying religious restrictions to medical care at a hospital in Orange County.​

Sutter launches ‘sweeping review’ of finances after $321M operating loss

Posted on by • Posted in Capital Budget, Capital Expenditure, Financial Viability, Financially Distressed, Health System, Hospital, Hospital Industry, Net Income, Non-Profit Healthcare Industry, Nonoperating Income, Operating Expense Reduction, Operating Expenses, Operating Income, Operating Margin, Operating Metrics, Operating Performance, Operating Revenue, Restructure • Leave a comment

https://www.healthcaredive.com/news/sutter-launches-sweeping-review-of-finances-after-321m-operating-loss/596221/

Digital assistant uses AI to ease medical documentation at Sutter | Health Data Management

Dive Brief:

  • Sutter Health is launching a “sweeping review” of its finances and operations due to the pandemic’s squeeze on the system in 2020, which led to a $321 million operational loss, the system said Thursday. 
  • The giant hospital provider in Northern California said it will take “several years to fully recover,” adding that it plans to restructure and even close some programs and services that attract fewer patients, and will reassign those employees to busier parts of its network. 
  • Sutter, which spent $431 million to modernize its facilities last year, is also reassessing its future capital investments due to its current financial situation. 

Dive Insight:

The pandemic “exacerbated” existing challenges for the provider, including labor costs, Sutter said. 

Expenses again outpaced revenue in 2020 and Sutter fears the trajectory is “unsustainable.” 

In 2020, Sutter generated revenue of $13.2 billion which was eclipsed by $13.5 billion in expenses, which was actually lower than its total expenses reported in 2019. 

Last year, the system invested heavily to prepare for the pandemic, buying up personal protective equipment and other supplies all while volumes declined. Sutter estimates it spent at least $121 million on COVID-19 supplies, which does not include outside staffing costs. 

Sutter said labor costs represented 60% of its total operating expenses, blaming high hospital wage indexes in Northern California, which it said are among the priciest in the country.

Still, Sutter was able to post net income of $134 million thanks in part to investment income, which was also deflated compared to the year prior. 

Volume has not rebounded to pre-pandemic levels, the system said. 

Admissions, emergency room visits and outpatient revenues all fell year over year, according to figures in Sutter’s audited financial statements. 

Other major health systems were pinched by the pandemic but were able to post a profit, including Kaiser Permanente.  

How hospital operators fared financially in 2020

Posted on by • Posted in Credit Downgrade, Credit Quality, Credit Ratings, Economic Crisis, Economic Stimulus, Financial Pressure, Financial Viability, Financially Distressed, Health System, Hospital, Hospital Industry, Market Outlook, Market Trends, Net Income, Non-Profit Healthcare Industry, Operating Expenses, Operating Income, Operating Margin, Operating Metrics, Operating Performance, Operating Revenue • Leave a comment
https://www.healthcaredive.com/news/how-hospital-operators-fared-financially-in-2020/597634/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202021-04-01%20Healthcare%20Dive%20%5Bissue:33363%5D&utm_term=Healthcare%20Dive

“For the most part providers were dependent on that CARES funding. I think they would have been in the red or break even without it,” Suzie Desai, a senior director at S&P Global Ratings, said.

The pandemic weighed heavily on the financial performance of not-for-profit hospitals in 2020, but some of the larger health systems remained profitable despite the upheaval — in large part thanks to substantial federal funding earmarked to prop up providers during the global health crisis. 

Industry observers have been closely watching to see how health systems ultimately fared in 2020. Now, with the fiscal-year ended and accounted for, analysts say the $175 billion in federal funds was crucial for providers’ bottom lines.

“Without the stimulus funding, it is very likely we would have seen more issuers [hospitals/health] systems experience either lower profitable margins, or outright losses from operations,” Kevin Holloran, senior director of U.S. public finance for Fitch Ratings, said.  

Still, the pandemic put a squeeze on nonprofit hospital margins last year, according to a recent Moody’s report that showed the median operating margin was 0.5% in 2020 compared to 2.4% in 2019.

The first half of the year hit providers especially hard as volumes fell drastically, seemingly overnight. Revenue plummeted alongside the volume declines as the nation paused lucrative elective procedures to preserve medical resources.

One estimate showed hospitals lost more than $20 billion as they halted surgeries in the early months of the outbreak in the U.S. 

But as the year wore on, the outlook improved as some volumes returned closer to pre-pandemic levels. At the same time, health systems worked to cut expenses to mitigate the financial strain.

Still, some health systems did post operational losses even with the federal funds meant to help them. Moody’s found that 42% of 130 hospitals surveyed posted an operating loss, an increase from 23% the year prior. Yet, the 2019 survey included more hospitals, a total of 282.

Sutter Health, the Northern California giant, reported an operating loss for 2020 and said it was launching a “sweeping review” of its finances as the pandemic exacerbated existing challenges for the provider. Washington-based Providence also reported an operating loss for 2020. However, both Sutter and Providence were able to post positive net income thanks in large part to investment gains.    

Investment income can aid nonprofit operators even when core operations are stunted like during 2020. Though, initially, the pandemic put stress on the stock market as uncertainty around the virus and its duration ballooned. The stock market took a dive and it was reflected in some six-month financials as both operations and investments took a hit. 

“COVID and the stimulus is (hopefully) a once in a lifetime disruption of operations,” Holloran said, who noted analysts have been trying to assess whether the top line losses can be placed squarely on COVID-19. If that’s the case, analysts are typically more apt to keep the provider’s existing rating. 

“For the most part providers were dependent on that CARES funding. I think they would have been in the red or break even without it,” Suzie Desai, a senior director at S&P Global Ratings, said.

For example, Arizona’s Banner Health would have posted an operating loss without federal relief, according to their financial reports. Banner Health was able to work its way back to black after it reported a loss through the first six months of the year. The same was true for Midwest behemoth Advocate Aurora. 

The providers that were able to weather the storm of the pandemic tended to be integrated systems that had a health plan under their umbrella. 

Kaiser Permanente ended the year with both positive operating and net income and returned relief funds it received.   

“The integrated providers, yeah, were one group that just had a natural hedge with the insurance premiums still coming in,” Desai said.  

Still, the hospital lobby is hoping to secure more funding for its members as the threat of the virus is still present even amid large scale efforts to vaccinate a majority of Americans to reach a blanket of protection from the novel coronavirus and its variants.

Shifting payer mix puts 340B hospitals at risk of losing eligibility

Posted on by • Posted in American Hospital Association (AHA), Dept of Health and Human Services (HHS), Health Policy, Health System, Hospital, Hospital Industry, Medicare, Medicare 340B Drug Discount Program • Leave a comment
https://www.healthcaredive.com/news/shifting-payer-mix-puts-340b-hospitals-at-risk-of-losing-eligibility/597688/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202021-04-01%20Healthcare%20Dive%20%5Bissue:33363%5D&utm_term=Healthcare%20Dive

Dive Brief:

  • Hospitals enrolled in the 340B drug discount program may no longer be eligible after the pandemic shifted their payer mix, according to a Wednesday letter the American Hospital Association sent to HHS Secretary Xavier Becerra.
  • Depleted patient volumes and canceled elective surgeries lowered the proportion of hospital patients who are Medicaid and Medicare SSI patients in 2020, according to AHA. When hospitals file their Medicare cost reports reflecting those changes, they may no longer meet the criteria for the program and lose access.
  • AHA wants HHS to waive certain eligibility requirements for hospitals in the program to allow them continued access during the public health emergency, according to the letter.

Dive Insight:

Throughout the pandemic HHS has issued a number of regulatory flexibilities to help providers, and the hospital lobby is asking it to do so again by waiving the current eligibility requirements for the 340B drug discount program before providers experiencing a temporary shift in payer mix are kicked out.

The program requires drug companies to give discounts on outpatient drugs to providers serving a large share of low-income patients, particularly those in rural areas.

The discounts can range from 25% to 50% of the cost of the drugs, according to HRSA, which operates the program.

But many of those patients did not seek care last year, hampering hospitals’ finances and altering the mix of payers.

Hospitals currently qualify for the program based on their volume of inpatient Medicaid and Medicare SSI patients, reported through their most recently filed Medicare cost reports.

“Losing access to 340B discounted drugs and program savings could jeopardize the ability of these hospitals to provide critical services for their communities, which would be particularly catastrophic at a time when they remain on the front lines of the ongoing pandemic,” AHA said in its letter.

This latest issue comes after several years of clashes over the 340B program. 

Last year, a federal appeals court sided against the hospital lobby, ruling that HHS’ significant rate cut for some 340B drugs could remain in place. HHS made the reimbursement cut arguing that the hospitals already received steep discounts for the drugs and could be incentivized to overuse them.

At the time, AHA said it was weighing its options over whether to appeal to the Supreme Court. 

To head off other issues, HRSA finalized a rule late last year that created a dispute resolution process for when hospitals believed they were overcharged for 340B drugs. The drug manufacturers have a similar mechanism to raise concerns about whether hospitals received duplicate discounts. 

The barriers to vaccine passports

Posted on by • Posted in Ethics, Fraud, Fraud and Abuse, Health Policy, Infection Control, Infection Control Plan, Infectious Virus, Public Health, Technology, Vaccine, Vaccine Distribution, Vaccine Efficacy, Vaccine Passports • Leave a comment

https://www.axios.com/barriers-coronavirus-vaccine-passport-ee5ae689-c9e2-4306-9671-0af28bf21445.html

Vaccine passports could become available soon to help people resume their lives — but they face numerous scientific, social and political barriers to being accepted.

The big picture: Reliable and accessible proof of vaccine-induced protection from the novel coronavirus could speed international travel and economic reopening, but obstacles to its wide-scale adoption are so great it may never fully arrive.

Driving the news: The secure digital identity app CLEAR and CommonPass, a health app that lets users access vaccination records and COVID-19 test results, will be working together to offer a vaccine passport service, my Axios colleague Erica Pandey reports.

  • The news comes as a growing number of countries and companies are talking up plans to introduce similar vaccine passports that could help the protected return to normal life and travel as soon as possible.
  • “To restart the economy, to save certain industries, I think you need a solution like this,” Eric Piscini, a vice president at IBM who oversaw the development of the company’s new health passport app, told the New York Times.

Yes, but: There are numerous health, ethical and operational questions that need to be resolved before vaccine passports could become an effective part of daily life.

Health: Medical experts still don’t fully know how effective vaccinations — or exposure to the virus — are at preventing onward transmission of COVID-19.

  • While the CDC is set to soon release new guidance around social activity for fully vaccinated people, current recommendations still call for them to keep wearing masks and practicing social distancing.
  • Until it’s clear that vaccination effectively prevents transmission, there’s a limit to how useful any vaccine passport can be for public health — especially if emerging variants render some vaccines less protective.
  • “The utility of a vaccine passport is only as good as the evidence of how long the immunity lasts,” David Salisbury, an associate fellow at think tank Chatham House, told Bloomberg. “You could find yourself with a stamp in your passport that lasts longer than the antibodies in your blood.”

Ethical: The most obvious use case for vaccine passports is for international travel, which has been crippled by onerous quarantine restrictions. But such a system risks locking out billions of people who are unable or unwilling to get the vaccine.

  • The EU has been discussing the creation of a vaccine passport, with tourism-dependent countries like Greece leading the charge. But Germany and France — where the vaccine rollout has been low and hesitancy is high — have reservations, and any such system looks to be months away.
  • A bigger ethical concern is the many people in developing countries who may not get access to vaccines of any sort for months or even years while rich nations hoard supplies.
  • And if vaccine passports are used not just for international travel but to allow people to work and engage in social life domestically, they could create cripplingly unequal barriers that might paradoxically reinforce vaccine hesitancy.

Operational: Passports for international travel are regulated by governments and have decades of history behind them, but there’s no such unified system for vaccine passports, which are being introduced by governments and businesses with different standards, making them a target for fraud.

  • The U.S. in particular has a decentralized medical system that can make it difficult for people to easily access their health care records, especially if they lack digital literacy.
  • “I can pretty much 100% guarantee that fraud is going to occur,” says Jane Lee, a trust and safety architect at the cybersecurity company Sift. “We will have a lot of bad actors where they pretend to offer a service that will provide some sort of vaccination passport, but it’s really a phishing campaign.”

Be smart: None of these obstacles are insurmountable on their own. But as we saw with the failures of digital contact tracing, just because a technological solution exists doesn’t mean it will be effective or adopted by the public.

  • “There’s a huge motivation to make this work socially,” says Kevin Trilli, chief product officer at Onfido, an identification verification company. “But there’s a lot of governmental issues that are going to really make the system difficult to implement.”
  • There’s a time pressure at work here as well, especially in the U.S, where vaccination rates have picked up. The more people who are vaccinated, the less value there will be in creating a complex system to sift the protected from the unprotected.

The bottom line: Some form of vaccine visas will likely be introduced for international travel, but it seems unlikely they’ll become a passport to resuming normal life.