Genesis Healthcare warns of possible bankruptcy

https://www.beckershospitalreview.com/finance/genesis-healthcare-warns-of-possible-bankruptcy.html?utm_medium=email

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Kennett Square, Pa.-based Genesis Healthcare, one of the largest post-acute care providers in the U.S., warned that bankruptcy is possible if its financial losses continue. 

“The virus continues to have a significant adverse impact on the company’s revenues and expenses, particularly in hard-hit Mid Atlantic and Northeastern markets,” Genesis CEO George V. Hager Jr., said in a Nov. 9 earnings release.

Mr. Hager said government stimulus funds the company received in the third quarter of this year fell nearly $60 million short of the company’s COVID-19 costs and lost revenue. 

Genesis said it has taken several steps to help offset the financial damage linked to the pandemic, including delaying payment of a portion of payroll taxes incurred through December. 

But the company warned that bankruptcy is possible if its financial losses continue. 

“Even if the company receives additional funding support from government sources and/or is able to execute successfully all of its these plans and initiatives, given the unpredictable nature of, and the operating challenges presented by, the COVID-19 virus, the company’s operating plans and resulting cash flows, along with its cash and cash equivalents and other sources of liquidity. may not be sufficient to fund operations for the 12-month period following the date the financial statements are issued,” Genesis said. “Such events or circumstances could force the company to seek reorganization under the U.S. Bankruptcy Code.”

Genesis ended the third quarter of this year with a net loss of $62.8 million, compared to net income of $46.1 million in the same period a year earlier. 

11 hospitals laying off workers

https://www.beckershospitalreview.com/finance/11-hospitals-laying-off-workers-110920.html?utm_medium=email

Layoffs costing hundreds of people their jobs in NC but notices don't  capture true scope of cuts | WRAL TechWire

The financial challenges caused by the COVID-19 pandemic have forced hundreds of hospitals across the nation to furlough, lay off or reduce pay for workers, and others have had to scale back services or close. 

Lower patient volumes, canceled elective procedures and higher expenses tied to the pandemic have created a cash crunch for hospitals. U.S. hospitals are estimated to lose more than $323 billion this year, according to a report from the American Hospital Association. The total includes $120.5 billion in financial losses the AHA predicts hospitals will see from July to December. 

Hospitals are taking a number of steps to offset financial damage. Executives, clinicians and other staff are taking pay cuts, capital projects are being put on hold, and some employees are losing their jobs. More than 260 hospitals and health systems furloughed workers this year and dozens of others have implemented layoffs. 

Below are 11 hospitals and health systems that announced layoffs since Sept. 1, most of which were attributed to financial strain caused by the pandemic. 

1. NorthBay Healthcare, a nonprofit health system based in Fairfield, Calif., is laying off 31 of its 2,863 employees as part of its pandemic recovery plan, the system announced Nov. 2. 

2. Minneapolis-based Children’s Minnesota is laying off 150 employees, or about 3 percent of its workforce. Children’s Minnesota cited several reasons for the layoffs, including the financial hit from the COVID-19 pandemic. Affected employees will end their employment either Dec. 31 or March 31.

3. Brattleboro Retreat, a psychiatric and addiction treatment hospital in Vermont, notified 85 employees in late October that they would be laid off within 60 days. 

4. Citing a need to offset financial losses, Minneapolis-based M Health Fairview said it plans to downsize its hospital and clinic operations. As a result of the changes, 900 employees, about 3 percent of its 34,000-person workforce, will be laid off.

5. Lake Charles (La.) Memorial Health System laid off 205 workers, or about 8 percent of its workforce, as a result of damage sustained from Hurricane Laura. The health system laid off employees at Moss Memorial Health Clinic and the Archer Institute, two facilities in Lake Charles that sustained damage from the hurricane.

6. Burlington, Mass.-based Wellforce laid off 232 employees as a result of operating losses linked to the COVID-19 pandemic. The health system, comprising Tufts Medical Center, Lowell General Hospital and MelroseWakefield Healthcare, experienced a drastic drop in patient volume earlier this year due to the suspension of outpatient visits and elective surgeries. In the nine months ended June 30, the health system reported a $32.2 million operating loss. 

7. Baptist Health Floyd in New Albany, Ind., part of Louisville, Ky.-based Baptist Health, eliminated 36 positions. The hospital said the cuts, which primarily affected administrative and nonclinical roles, are due to restructuring that is “necessary to meet financial challenges compounded by COVID-19.”

8. Cincinnati-based UC Health laid off about 100 employees. The job cuts affected both clinical and non-clinical staff. A spokesperson for the health system said no physicians were laid off. 

9. Mercy Iowa City (Iowa) announced in September that it will lay off 29 employees to address financial strain tied to the COVID-19 pandemic. 

10. Springfield, Ill.-based Memorial Health System laid off 143 employees, or about 1.5 percent of the five-hospital system’s workforce. The health system cited financial pressures tied to the pandemic as the reason for the layoffs. 

11. Watertown, N.Y.-based Samaritan Health announced Sept. 8 that it laid off 51 employees and will make other cost-cutting moves to offset financial stress tied to the COVID-19 pandemic.

9 hospitals with strong finances

9 hospitals with strong finances

https://www.beckershospitalreview.com/finance/9-hospitals-with-strong-finances-102020.html?utm_medium=email

Here are nine hospitals and health systems with strong operational metrics and solid financial positions, according to reports from Fitch Ratings, Moody’s Investors Service and S&P Global Ratings.

1. St. Louis-based Ascension has an “AA+” rating and stable outlook with Fitch. The system has a strong financial profile and a significant presence in several key markets, Fitch said. The credit rating agency expects Ascension will continue to produce healthy operating margins. 

2. Phoenix-based Banner Health has an “AA-” rating and stable outlook with Fitch and S&P. Banner’s financial profile is strong, even taking into consideration the market volatility that occurred in the first quarter of this year, Fitch said. The credit rating agency expects the system to continue to improve operating margins and to generate cash flow sufficient to sustain strong key financial metrics. 

3. Cincinnati-based Bon Secours Mercy Health has an “AA-” rating and stable outlook with Fitch. The health system has a good payer mix, a leading position in several of its markets and adequate margins to support its growth, Fitch said. The credit rating agency expects the system to maintain strong operating profitability.  

4. Children’s Hospital of Philadelphia has an “Aa2” rating and stable outlook with Moody’s and an “AA” rating and stable outlook with S&P. The hospital has a strong market position and healthy liquidity, Moody’s said. The credit rating agency expects CHOP’s market position and brand equity will support its recovery from disruption caused by COVID-19. 

5. Milwaukee-based Children’s Wisconsin has an “Aa3” rating and stable outlook with Moody’s and an “AA” rating and stable outlook with S&P. The health system has strong cash flow margins, Moody’s said. The credit rating agency expects the health system’s financial performance to remain solid, given its commanding market presence and demand for services. 

6. Philadelphia-based Main Line Health has an “AA” rating and stable outlook with Fitch. The credit rating agency expects the system’s operations to recover after the COVID-19 pandemic and for it to resume its track record of strong operating cash flow margins. 

7. Midland-based MidMichigan Health has an “AA-” rating and stable outlook with Fitch. The system has generated healthy operational levels through fiscal year 2020, and Fitch expects it to continue generating strong cash flow. 

8. Columbus, Ohio-based Nationwide Children’s Hospital has an “Aa2” rating and stable outlook with Moody’s. The system has a strong market position in pediatric services in Columbus and the broad central Ohio region, and its advanced research capabilities will support volume recovery from disruption caused by COVID-19, Moody’s said. The credit rating agency expects Nationwide Children’s margins to remain strong and for cost management initiatives and volume recovery to drive improvements. 

9. Chicago-based Northwestern Memorial HealthCare has an “Aa2” rating and stable outlook with Moody’s. The health system had strong pre-COVID margins and liquidity, Moody’s said. The credit rating agency expects the system to maintain strong operating cash flow margins. 

Lee Health to freeze pay for 13,500 employees

https://www.beckershospitalreview.com/compensation-issues/lee-health-to-freeze-pay-for-13-500-employees.html?utm_medium=email

Tuesday's Headlines: Junior Bankers Watch Out—Pay Freeze May Be Imminent |  eFinancialCareers

Fort Myers, Fla.-based Lee Health is freezing salaries for its 13,500 employees next year to help offset financial losses tied to the COVID-19 pandemic, according to the Fort Myers News-Press

The pay freeze in 2021 will mark the first time in nine years that the publicly operated health system has not given employee raises. Salaries and benefits make up about half of the system’s nearly $2 billion in spending each year, according to the report.

Lee Health is facing a budget deficit for the first time in two decades due to financial strain linked to the pandemic. The salary freeze is one of several steps the system is taking to offset losses and avoid layoffs. 

The system has halted most capital projects, and its top executives took pay cuts earlier this year. Lee Health will also reduce the match for employee retirement plans from 5 percent to 4 percent next year, and health plan premiums and copays will also increase, according to the report.

Read the full Fort Myers News-Press article here

 

 

 

 

Another 870,000 Americans filed new unemployment claims last week

https://finance.yahoo.com/news/jobless-claims-coronavirus-unemployment-week-ended-september-19-2020-184747657.html

Another 870,000 Americans filed for first-time unemployment benefits last week, unexpectedly rising slightly from the prior week to reaffirm a slowdown in the U.S. economic recovery.

The U.S. Department of Labor (DOL) released its weekly jobless claims report at 8:30 a.m. ET Thursday. Here were the main metrics from the report, compared to Bloomberg estimates:

  • Initial jobless claims, week ended Sept. 19: 870,000 vs. 840,000 expected, and 866,000 during the prior week
  • Continuing claims, week ended Sept. 12: 12.580 million vs. 12.275 million expected, and 12.747 million during the prior week

At 870,000, Thursday’s figure represented the fourth consecutive week that new jobless claims came in below the psychologically important 1 million level, but was still high on a historical basis. Nevertheless, the labor market has made strides in recovering from the pandemic-era spike high of nearly 7 million weekly new claims seen in late March.

“While jobless claims under a million for four straight weeks could be considered a positive, we’re staring down a pretty stagnant labor market,” Mike Loewengart, managing director of investment strategy for E-Trade Financial Corporation, said in an email Thursday. “This has been a slow roll to recovery and with no signs of additional stimulus from Washington, jobless Americans will likely continue to exist in limbo. Further, a shaky labor market translates into a skittish consumer, and in the face of a pandemic that seemingly won’t go away without a vaccine, the outlook for the economy certainly comes into question.”

On an unadjusted basis, initial jobless claims rose by a greater margin, or about 28,500, from the previous week to about 824,500. The seasonally adjusted level of new claims rose by 4,000 week on week.

By state, unadjusted claims in California – where joblessness due to the pandemic has compounded with labor market stress due to wildfires – were again the highest in the country at more than 230,000, for an increase of about 4,400 week-over-week. Georgia, New York, New Jersey and Massachusetts also reported significant increases in new claims relative to the rest of the country. Most states reported at least increases in new claims last week.

Continuing claims have also trended lower after a peak of nearly 25 million in May, and fell for a second straight week in this week’s report. But these claims, which capture the total number of individuals still receiving unemployment insurance, have not broken below the 12 million mark since before the pandemic took hold of the labor market in mid-March.

Consistently high numbers of individuals have been filing for, and receiving, jobless benefits from regular state programs, and those newly created during the pandemic. The number of individuals claiming benefits in all programs for the week ended September 5 – the latest reported week – fell for the first time following three straight weeks of increases to 26.04 million, from the nearly 29.8 million reported during the prior week.

Of that total, more than 11.5 million comprised individuals receiving Pandemic Unemployment Assistance, which is aimed at self-employed and gig workers who don’t qualify for regular unemployment compensation but have still been impacted by the pandemic.

One of the major downside risks to further improvement in the labor market has been concern that Congress may not soon pass another round of fiscal stimulus aimed at keeping individuals on payrolls during the pandemic. Economists have already said that the end of the last round of augmented federal unemployment benefits in late July has weighed on improvements in joblessness.

“The current picture suggests that growth has slowed sharply in the past three months, and that the labor market is stalling again in the face of rising infections and the sudden ending of federal government support to unemployed people,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, said in a note Wednesday.

The need for more fiscal stimulus to encourage the economy’s ongoing recovery has become a key talking point of policymakers including Federal Reserve Chair Jerome Powell and his colleagues at the central bank. In congressional testimony Tuesday and Wednesday, the Fed leader said further fiscal stimulus is “unequaled” by any other form of support that could be unleashed, with the central bank’s lending facilities having gone largely untouched by Main Street.

“The concept of the [congressionally authorized] Paycheck Protection Program was helpful because for many of those kinds of businesses – those businesses that don’t have cash reserves – the ability to get a forgivable loan if they stay open, if they keep people employed, was sound, and did give them the prospect of staying in business,” Joseph Minarik, The Conference Board chief policy economist and former Office of Management and Budget chief economist, told Yahoo Finance. “The notion that you have businesses that have been weak over the last few months and now have simply had to shut their doors, that’s a real problem, and it is not necessity going to be solved with a loan.”

 

 

 

 

House government funding bill gives providers relief on Medicare advance payments

https://www.fiercehealthcare.com/hospitals/house-government-funding-bill-gives-providers-relief-medicare-advance-payments?utm_medium=nl&utm_source=internal&mrkid=959610&mkt_tok=eyJpIjoiWTJZek56Z3lNV1E0TW1NMyIsInQiOiJKdUtkZE5DVGphdkNFanpjMHlSMzR4dEE4M29tZ24zek5lM3k3amtUYSt3VTBoMmtMUnpIblRuS2lYUWozZk11UE5cL25sQ1RzbFpzdExcL3JvalBod3Z6U3BZK3FBNjZ1Rk1LQ2pvT3A5Witkc0FmVkJocnVRM0dPbFJHZTlnRGJUIn0%3D

The House passed a short-term government funding bill that extends the deadline for providers to start repaying Medicare advance payment loans to the end of the COVID-19 public health emergency.

The bill that the House passed late Tuesday is a major win for provider groups who worried they could struggle to repay the Medicare loans starting in August. The bill still has to pass through the GOP-controlled Senate.

The continuing resolution, which funds the federal government through Dec. 11, also lowers the interest rate for payments made under the Medicare Accelerated and Advance Payment Program to 4%, down from 10.25%.

The Centers for Medicare & Medicaid Services (CMS) gave out more than $100 billion in advance payments in March to providers slammed by the pandemic. The payments are essentially loans which CMS recoups by garnishing Medicare payments to providers. That process starts 120 days after the first payment was received.

But the bill would give providers one year before Medicare can claim their payments.

It would also give providers 29 months since the first payment to fully repay the loan amount. Currently, CMS gives providers a year to fully repay.

In addition to the changes to the repayment terms, the bill also delays $4 billion in payment cuts to disproportionate share hospitals that were supposed to go into effect as part of the Affordable Care Act. The cuts will now be delayed until December.

The bill earned plaudits from the hospital industry, which has pressed Congress for help as providers are still struggling with the pandemic and could not afford to have Medicare payments become garnished.

“Our hospitals continue to suffer high costs and revenue losses associated with COVID-19, and they welcome the relief this continuing resolution would provide,” said Bruce Siegel, president and CEO of America’s Essential Hospitals, which represents safety net hospitals.

The Federation of American Hospitals said earlier this week before the House vote that the advance payment program is a “vital lifeline to hospitals and healthcare providers during the pandemic that has enabled hospitals and providers to maintain access to critical patient care. But the ongoing pressures of the current crisis required a revision of the repayment terms.”

The bill, which has approval from the White House, now heads to the Senate. The chamber must reach a decision on the legislation to avoid a government shutdown when funding runs out on Sept. 30.

 

 

 

 

A Wall Street Giant Tapped $1.5 Billion in Federal Aid for Its Hospitals

https://www.bloomberg.com/news/articles/2020-09-14/a-wall-street-giant-tapped-1-5-billion-in-federal-aid-for-its-hospitals

LifePoint’s Castleview Hospital in Price, Utah.

Private equity firm, flush with cash, sees ‘upside’ and more acquisitions.

Like hospital chains across the U.S., LifePoint Health tapped federal relief money to blunt the cost of the Covid-19 pandemic. It was a potent lifeline, a total of $1.5 billion.

But LifePoint is unusual in one respect, its owner: private equity firm Apollo Global Management, led by billionaire Leon Black.

LifePoint was certainly eligible for the money. But the extent of the federal assistance could contribute to concern in Washington over whether private equity-backed hospitals should have been. In July, the U.S. House passed a bill that would require health-care companies to disclose any private equity backing when seeking short-term loans from the federal Medicare program.

The reason for lawmakers’ concern: Private equity firms have ample access to cash. As recently as June, the Apollo fund that owns LifePoint had more than $2 billion to support its investments. Apollo, which manages $414 billion, recently told investors in an internal document that LifePoint was in such a strong market position that it was planning to make acquisitions of less fortunate hospitals.

The relief flowing to LifePoint illustrates a drawback of a government program designed to send out money quickly to every hospital, regardless of financial circumstances, according to Gerard Anderson, a health policy professor at Johns Hopkins University.

“This particular hospital system does not appear to need the money,” he said.

LifePoint and Apollo say they absolutely did. In their view, taxpayer money helped cover the soaring cost of treating Covid-19 patients and lost revenue because of the loss of fees from lucrative elective procedures. The assistance enabled the chain to retain all of its workers and provide essential service to its communities, they said.

“No health-care provider, including LifePoint, is immune to this, regardless of their ownership,” said LifePoint spokesperson Michelle Augusty.

Said an Apollo spokesperson: “Apollo is proud of LifePoint’s response to the Covid pandemic as they continue to provide vital care for both Covid and non-Covid patients.’’

LifePoint owns a far-flung collection of small-town hospitals, from Western Plains Medical Complex in Dodge City, Kansas, to Bourbon Community Hospital in Paris, Kentucky. For years, private equity has been pushing into every corner of American health care. Many medical professionals worry that these Wall Street-style investors will inevitably put profits before patients – something private equity denies.

LifePoint’s Willamette Valley Medical Center in McMinnville, Oregon.

In April, LifePoint Chief Executive Officer David Dill and other hospital officials met with President Donald Trump. Dill urged Trump to keep helping hospitals, noting that LifePoint’s medical centers tend to be in the middle of the country, “smaller communities, which I know are communities very important to you,’’ according to a transcript of the meeting.

Rural hospitals are a very important part of the infrastructure in this country and also treating the uninsured and the Medicaid population as well,’’ Dill said.

Trump pointed out that the hospitals didn’t appear to be in the “hot spots.” Dill acknowledged they were handling only “a couple hundred Covid patients.” (The company said it has now cared for almost 20,000.)

In April, the month the government started distributing assistance, LifePoint borrowed $680 million in the capital markets. It also had access to $900 million in cash and an $800 million credit line, according to Moody’s Investors Service

By Apollo’s own account, LifePoint was doing just fine when the pandemic struck. In fact, it was thriving – and looking to expand. As of March 31, shortly before LifePoint got taxpayer dollars, Apollo’s investors were on track to double their money, internal documents show. On paper, they were sitting on a gain of more than $800 million.

“Independent hospital systems have greater difficulty weathering prolonged periods of financial stress,’’ Apollo wrote to its investors in May. “A  consolidation strategy will provide meaningful upside for Apollo funds’ investment.’’

Apollo said the crisis represented an opportunity: “The coronavirus pandemic will serve as a catalyst for additional M&A opportunities given the attractive scale and overall position of the LifePoint platform.”

Apollo is one of three private equity firms whose hospitals, as a group, received a total of about $2.5 billion in bailout grants and loans, according to an analysis of the latest federal records. That’s a conservative figure because it doesn’t count the many smaller sums distributed to subsidiaries.
LifePoint’s UP Health System-Marquette in Michigan.
Steward Health Care, a hospital  chain financed by private equity firm Cerberus Capital Management, received $675 million in grants and loans. In May, Cerberus transferred ownership of Steward to a group of doctors in exchange for a note that can be converted into a 37.5% equity stake. Another hospital company, Prospect Medical Holdings, owned by private equity firm Leonard Green & Partners, took in $375 million.
Apollo’s LifePoint hospitals received the most: $941 million in subsidized loans and $535 million in outright grants. 
While Democratic lawmakers have said such firms could have instead tapped their own cash stockpiles, private equity industry representatives have said they have a duty to manage that money in the best interests of their investors, which include public pension plans.
A Wall Street Giant Tapped $1.5 Billion in Federal Aid for Its Hospitals -  Bloomberg

Apollo built its rural hospital empire through the acquisition of three regional hospital chains in 2015, 2016 and 2018.  Apollo Investment Fund VIII LP owns 76% of LifePoint, which is based in Brentwood, Tennessee.

Even though many individual rural hospitals are struggling, Apollo says it can operate them more efficiently by merging them together. LifePoint now owns 88 hospitals in 29 states. It had almost $9 billion of annual revenue last year.

Apollo says that on its watch, the chain has improved its infrastructure and technology, recruited care providers and built new centers.

And for rural hospitals, Apollo argues, bigger is better.

“We continue to believe that rural hospitals can benefit from being part of a larger well-run system that enables access to greater resources and infrastructure for improved patient care,” the Apollo spokesperson said.

 

 

Despite turbulence in H1, no avalanche of health systems downgrades

https://www.healthcaredive.com/news/despite-turbulence-in-h1-no-avalanche-of-health-systems-downgrades/584353/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202020-09-02%20Healthcare%20Dive%20%5Bissue:29437%5D&utm_term=Healthcare%20Dive

“It’s new territory, which is why we’re taking that measured approach on rating actions,” Suzie Desai, senior director at S&P, said.

The healthcare sector has been bruised from the novel coronavirus and the effects are likely to linger for years, but the first half of 2020 has not resulted in an avalanche of hospital and health system downgrades.

At the outset of the pandemic, some hospitals warned of dire financial pressures as they burned through cash while revenue plunged. In response, the federal government unleashed $175 billion in bailout funds to help prop up the sector as providers battled the effects of the virus.

Still, across all of public finance — which includes hospitals — the second quarter saw downgrades outpacing upgrades for the first time since the second quarter of 2017.

S&P characterized the second quarter as a “historic low” for upgrades across its entire portfolio of public finance credits.

“While only partially driven by the coronavirus, the second quarter was the first since Q2 2017 with the number of downgrades surpassing upgrades and by the largest margin since Q3 2014,” according to a recent Moody’s Investors Service report.

Through the first six months of this year, Moody’s has recorded 164 downgrades throughout public finance and, more specifically, 27 downgrades among the nonprofit healthcare entities it rates.

By comparison, Fitch Ratings has recorded 14 nonprofit hospital and health system downgrades through July and just two upgrades, both of which occurred before COVID-19 hit.

“Is this a massive amount of rating changes? By no means,” Kevin Holloran, senior director of U.S. Public Finance for Fitch, said of the first half of 2020 for healthcare.

Also through July, S&P Global recorded 22 downgrades among nonprofit acute care hospitals and health systems, significantly outpacing the six healthcare upgrades recorded over the same period.

“It’s new territory, which is why we’re taking that measured approach on rating actions,” Suzie Desai, senior director at S&P, said.

Still, other parts of the economy lead healthcare in terms of downgrades. State and local governments and the housing sector are outpacing the healthcare sector in terms of downgrades, according to S&P.

Virus has not ‘wiped out the healthcare sector’

Earlier this year when the pandemic hit the U.S., some made dire predictions about the novel coronavirus and its potential effect on the healthcare sector.

Reports from the ratings agencies warned of the potential for rising covenant violations and an outlook for the second quarter that would result in the “worst on record, one Fitch analyst said during a webinar in May.

That was likely “too broad of a brushstroke,” Holloran said. “It has not come in and wiped out the healthcare sector,” he said. He attributes that in part to the billions in financial aid that the federal government earmarked for providers.

Though, what it has revealed is the gaps between the strongest and weakest systems, and that the disparities are only likely to widen, S&P analysts said during a recent webinar.

The nonprofit hospitals and health systems pegged with a downgrade have tended to be smaller in size in terms of scale, lower-rated already and light on cash, Holloran said.

Still, some of the larger health systems were downgraded in the first half of the year by either one of the three rating agencies, including Sutter Health, Bon Secours Mercy Health, Geisinger, University of Pittsburgh Medical Center and Care New England.

“This is something that individual management of a hospital couldn’t control,” said Rick Gundling, senior vice president of Healthcare Financial Management Association, which has members from small and large organizations. “It wasn’t a bad strategy — that goes into a downgrade. This happened to everybody.”

Deteriorating payer mix

Looking forward, some analysts say they’re more concerned about the long-term effects for hospitals and health systems that were brought on by the downturn in the economy and the virus.

One major concern is the potential shift in payer mix for providers.

As millions of people lose their job they risk losing their employer-sponsored health insurance. They may transition to another private insurer, Medicaid or go uninsured.

For providers, commercial coverage typically reimburses at higher rates than government-sponsored coverage such as Medicare and Medicaid. Treating a greater share of privately insured patients is highly prized.

If providers experience a decline in the share of their privately insured patients and see a growth in patients covered with government-sponsored plans, it’s likely to put a squeeze on margins.

The shift also poses a serious strain for states, and ultimately providers. States are facing a potential influx of Medicaid members at the same time state budgets are under tremendous financial pressure. It raises concerns about whether states will cut rates to their Medicaid programs, which ultimately affects providers.

Some states have already started to re-examine and slash rates, including Ohio.

 

 

 

 

Hospitals face closure as $100B in Medicare loans come due

https://www.beckershospitalreview.com/finance/hospitals-face-closure-as-100b-in-medicare-loans-come-due.html?utm_medium=email

HCA posts a billion-dollar profit, bolstered by CARES Act funds - MedCity  News

CMS accelerated payments to hospitals and other healthcare providers at the beginning of the COVID-19 pandemic to help temporarily relieve financial strain. It’s time to begin repaying the Medicare loans but that isn’t possible for some rural hospitals, according to NPR

CMS expanded the Accelerated and Advance Payment Program in late March to help offset financial damage caused by the COVID-19 pandemic. CMS announced April 26 that it was reevaluating pending and new applications for advance payments due to the availability of funds under the Coronavirus Aid, Relief and Economic Security Act. As of May, CMS had paid out $100 billion in advance payments, the bulk of which went to hospitals. 

Hospitals and other healthcare providers are required to start repaying the Medicare loans this month. Most hospitals will have one year from the date the first loan payment was made to repay the loans, according to Kaiser Family Foundation.

Ozarks Community Hospital, 25-bed critical access hospital in Gravette, Ark., is one of the hospitals that applied for and accepted the Medicare loans. The hospital also received grants made available under the CARES Act, which do not have to be repaid.

CEO Paul Taylor said Ozarks Community Hospital’s revenue is still constrained, and he doesn’t know how it will pay back its $8 million Medicare loan. Payments for new Medicare claims will be offset to repay the loans, but losing those payments could force the hospital to close, Mr. Taylor told NPR.

“If I get no relief and they take the money … we won’t still be open,” he said.

Ozarks Community Hospital is one of more than 850 critical access hospitals in rural areas that received Medicare loans, according to NPR. Given the shaky financial footing of many rural hospitals before the pandemic, the strain of having Medicare payments withheld could be enough to force others to shut down. 

Before the pandemic, more than 600 rural hospitals across the U.S. were vulnerable to closure, according to an estimate from iVantage Health Analytics, a firm that compiles a hospital strength index based on data about financial stability, patients and quality indicators.

If the financial pressures tied to the pandemic force any of those hospitals to shut down, they’ll join the list of 131 rural hospitals that have closed over the past decade, according to the Cecil G. Sheps Center for Health Services Research.

 

 

 

 

Sutter posts $857M loss in H1 on investment, operational declines

https://www.healthcaredive.com/news/sutter-posts-857m-loss-in-h1-on-investment-operational-declines/583910/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202020-08-21%20Healthcare%20Dive%20%5Bissue:29231%5D&utm_term=Healthcare%20Dive

California's Sutter Health reaps rewards from investments in ...

Dive Brief:

  • Sutter Health had a staggering loss of $857 million in the first half of the year as the Northern California health was bruised by the pandemic. That’s almost a $1.4 billion drop in income compared to the first half of last year, a plummet Sutter management largely blamed on investment and operational losses in its latest financial filing posted Thursday.
  • The virus shuttered operations for a period of time, driving Sutter’s revenue down 8% to $6.1 billion during the first half of the year. Expenses climbed nearly 2%, contributing to an operating loss of $557 million.
  • Still, the nonprofit noted it did experience a significant rebound in its investments in the second quarter after weathering the devastating effects of the first quarter.

Dive Insight:

Sutter joins other major nonprofit health systems in posting net losses for the first half of the year despite receiving hundreds of millions in federal grants to help offset headwinds brought on by the pandemic.

Recently, both Renton, Washington-based Providence and Arizona-based Banner Health posted losses for the first half of the year — $538 million and $267 million, respectively. Dampened revenue and downturns in investments contributed to their losses.

The federal government has funneled billions of dollars to providers across the country in an attempt to help them weather the downturn in patient volumes. Sutter noted in its filing that it’s received $400 million in federal relief funds so far, though that wasn’t enough to push the health system back into the black. Sutter operates 29 hospitals and enjoys a large presence in Northern California.

Sutter reported fewer admissions and emergency room visits in the second quarter compared to the prior-year period, down about 10% and 19%, respectively.

The pandemic was quick to wreak havoc on Sutter’s finances during the first quarter, in which the system reported an operating loss of $236 million and a net loss of almost $1.1 billion.

The coronavirus is also serving as a drag on its ratings. In April, two of the three big ratings agencies downgraded Sutter Health’s rating.

In part, Moody’s attributed the downgrade to Sutter’s weaker profitability profile. In its rationale, Moody’s said, “Following a second year of weaker results, margins in 2020 are likely to remain under pressure due to COVID-19 related disruptions, ongoing performance challenges at some of Sutter’s facilities, and continued reimbursement pressure.”

Also weighing on Moody’s rating is the $575 million settlement expected to be paid this year to resolve antitrust issues. Last year, the health system averted a trial over antitrust concerns after agreeing to a settlement with California regulators. Sutter agreed it would end any contracts that require all of its facilities to be in-network or none of them and cap out-of-network charges, among other stipulations.