Medicaid expansion key indicator for rural hospitals’ financial viability

https://www.healthcaredive.com/news/medicaid-expansion-rural-hospitals-health-affairs/579005/

Hospital Closures, Underfunded Health Centers In Ohio Valley ...

Dive Brief:

  • Struggling rural hospitals are faring better financially in states that expanded Medicaid under the Affordable Care Act, according to a new Health Affairs study examining 1,004 rural hospitals’ CMS cost reports submitted from 2011 to 2017.
  • Among rural, nonprofit critical access hospitals in states that expanded Medicaid, the median overall margin increased from 1.8% to 3.7%, while it dropped from 3.5% to 2.8% in states that did not expand the program.
  • Tax-exempt status played another key role in determining rural hospitals’ financial viability. During the study period, the median overall profit margin at nonprofit critical access hospitals rose from 2.5% to 3.2%, while it dropped among for-profit operators from 3.2% to 0.4%.

Dive Insight:

The unprecedented financial distress mega health systems are under amid the ongoing pandemic is all too familiar to rural hospitals.

These systems are often smaller, employing fewer specialists and less medical technology, thus limiting the variety of services they can provide and profit on. They remain the closest point of care for millions of Americans, yet face rising closures.

The good news is that most rural hospitals are nonprofit, the designation that fared best in Health Affairs’ six-year study. More than 80% of the 1,004 private, rural hospitals analyzed in the study were nonprofit, while 17% were for-profit.

But researchers found Medicaid expansion played a key role in rural hospitals’ financial viability during the study period, with closures occurring more often in the South than in other regions.

Thirty-seven states have expanded Medicaid under the ACA, but 14 have not, and a majority of them are concentrated in the southern U.S., according to data from the Kaiser Family Foundation.

One of those states is Oklahoma, which on Monday withdrew its planned July 1 Medicaid expansion, citing a lack of funding.

Another factor researchers found positively associated with overall margins and financial viability was charge markups, or the charged amount for a service relative to the Medicare allowable cost. Hospitals with low-charge markups had median overall margins of 1.8%, while those with high-charge markups had margins at 3.5%.

The same is true for occupancy rates. In 2017, rural hospitals with low occupancy rates had median overall profit margins of 0.1% Those with high occupancy rates had margins of 4.7%.

That presents a unique challenge for rural hospitals. Reimbursements from public and private payers do not compensate for fixed costs associated with providing standby capacity, which is essential in rural communities, where few hospitals serve large geographic areas.

Since 1997, CMS has been granting rural hospitals — particularly those with 25 or fewer acute care inpatient beds and located more than 35 miles from another hospital — critical access status, reimbursing them at cost for treating Medicare patients.

In the Health Affairs study, critical access hospitals accounted for 21% of the rural hospital bed capacity, with the remaining 79% of bed capacity provided by noncritical access hospitals.

 

 

 

 

16 latest hospital credit rating downgrades

https://www.beckershospitalreview.com/finance/16-latest-hospital-credit-rating-downgrades-051120.html?utm_medium=email

20 recent hospital, health system outlook and credit rating ...

The following 16 hospital and health system credit rating downgrades occurred since March 1. They are listed below in alphabetical order.

1. Boulder (Colo.) Community Health — from “A2” to “A3” (Moody’s Investors Service)

2. Butler (Pa.) Health System — from “Baa1” to “Baa2” (Moody’s Investors Service)

3. Catholic Health System (Buffalo, N.Y.) — from “Baa1” to “Baa2” (Moody’s Investors Service)

4. Catholic Medical Center (Manchester, N.H.) — from “Baa1” to “Baa2” (Moody’s Investors Service)

5. Hutchinson (Kan.) Regional Medical Center — from “Baa3” to “Ba1” (Moody’s Investors Service)

6. Magnolia Regional Health Center (Corinth, Miss.) — from “Ba3” to “B1” (Moody’s Investors Service)

7. Marshall Medical Center (Placerville, Calif.) — from “BBB-” to “BB+” (Fitch Ratings)

8. Prisma Health (Greenville, S.C.) — from “A2” to “A3” (Moody’s Investors Service)

9. Quorum Health (Brentood, Tenn.) — from “Caa2” to “Ca” (Moody’s Investors Service)

10. SoutheastHealth (Cape Girardeau, Mo.) — from “Baa3” to “Ba1” (Moody’s Investors Service)

11. Sutter Health (Sacramento, Calif.) — from “Aa3” to “A1” (Moody’s Investors Service); from “AA-” to “A+” (S&P Global Ratings)

12. University of Vermont Health Network (Burlington) — from “A2” to “A3” (Moody’s Investors Service)

13. UPMC (Pittsburgh) — from “A+” to “A” (Fitch Ratings); from “A1” to “A2” (Moody’s Investors Service)

14. Virginia Mason Medical Center (Seattle) — from “Baa2” to “Baa3” (Moody’s Investors Service)

15. Washington County (Calif.) Health Care District — from “Baa1” to “Baa2”  (Moody’s Investors Service)

16. Wood County Hospital (Bowling Green, Ky.) — from “Ba2” to “Ba3” (Moody’s Investors Service)

 

 

 

 

Envision Healthcare considering bankruptcy filing

https://mailchi.mp/0d4b1a52108c/the-weekly-gist-april-24-2020?e=d1e747d2d8

KKR-backed Envision Healthcare hires restructuring advisers ...

 

National physician staffing firm Envision Healthcare is considering filing for bankruptcy, according a report from Bloomberg. Sources say the company, backed by private equity (PE) firm KKR, which acquired Envision for $9.9B in June 2018, has hired restructuring advisors and is working with an investment bank. The abrupt halt to elective surgeries and reduction in emergency room volumes due to COVID-19 has caused Envision’s business to shrink by 65 to 75 percent in just two weeks at its 168 open ambulatory surgery centers (ASCs), compared to the same time period last year.

The Nashville-based company, which employs over 25,000 physicians and advanced practitioners, has already been reducing pay for providers and executives, in addition to implementing temporary furloughs. Envision is also struggling with a debt load of more than $7B, resulting from its 2018 leveraged buyout, and has been unable to convince its bondholders to approve a debt swap.

It remains to be seen whether Envision will be a bellwether for how other PE-backed physician groups will weather the ongoing COVID crisis. While Envision’s composition of mainly hospital- and ASC-based providers, coupled with its huge debt load, leave it on especially shaky financial footing, many PE-backed physician groups will struggle this year to achieve anything close to the 20 percent annual rate of return often promised to investors.

If high-profile PE-backed groups like Envision end up declaring bankruptcy, it will likely impact the calculus of the many independent practices which may have previously looked to PE firms for acquisitionand temper the enthusiasm of investors, who might see physician staffing and practice roll-ups as less attractive as volumes continue to fluctuate.

 

 

 

Hospital leaders plead for financial help, warn of closures, missing payroll

https://www.healthcaredive.com/news/hospital-leaders-plead-for-financial-help-warn-of-closures-missing-payrol/574625/

Hospital executives from across the country sounded the alarm Saturday about the dire need for federal financial aid as their cash on hand continues to erode amid the coronavirus pandemic.

“We’ll exhaust all avenues to make payroll in the next few weeks,” Scott Graham, CEO of Three Rivers and North Valley Hospitals in rural Washington said of Three Rivers during a call with reporters Saturday morning.

The American Hospital Association is urging lawmakers on Capitol Hill to consider deploying at least $100 billion to aid hospitals fight against the outbreak of the novel coronavirus. The relief package would fund medical personnel, supplies and infrastructure, and expenses related to COVID-19, Rick Pollack, CEO of AHA, told reporters.

Without a relief package, Pollack warned it “could mean that many hospitals won’t survive.” The pleas came as Congress debates a stimulus package this weekend.

American life has ground to halt as experts urge the public to distance themselves from others in an attempt to slow the spread of the virus. Many states closed bars and restaurants with virtually all group events canceled. Likewise, hospitals have been asked — or required in some locales — to halt all elective procedures to free up resources for an expected surge of patients.

But hospitals rely on those typically lucrative procedures to drive revenue. Some hospitals are starting to wonder how they’ll keep the lights on after facing the reality of canceled procedures and the need to increase staff and supplies to combat the pathogen.

On top of that, hospitals are unable to get much needed supplies as some vendors are requiring payment on delivery, funds they do not have.

There is no time to waste, hospital leaders warned, citing less than two weeks cash on hand.

“We need to get this done now,” Pollack said of an emergency funding package from the federal government.

Despite the dire financial strain, hospitals are still preparing to increase capacity to meet a surge in demand. It’s unclear whether they will be reimbursed for all expenses related to increasing the amount of beds, capacity and supplies.

Some areas were already facing a shortage of nurses and physicians before the outbreak and anticipate that to become worse.

“In spite of our existing financial challenges, we are planning to increase capacity because that is what we must do,” LaRay Brown, CEO of One Brooklyn Health System in New York, said Saturday. One Brooklyn​ operates three hospitals, nursing homes and community health centers in New York, serving about 2 million.

Brown said all hospitals in New York were asked Friday by state health officials to submit plans for the upping of capacity by 50% of existing bed count.

Brown anticipates receiving some support from the state of New York but seemed wary of the state’s future financial footing as it battles the pathogen as well, and with a weakened tax base as businesses have shuttered.

“This is why I’m on this call,” Brown said. “We need immediate cash relief from the federal government.”

 

 

 

Judge approves $55M sale of Hahnemann residency programs

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/judge-approves-55m-sale-of-hahnemann-residency-programs.html

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Bankruptcy judge approves sale of Hahnemann residency slots
 
This week a Federal judge ruled that the owner of Hahnemann University Hospital could move forward with the sale of the system’s more than 550 residency slots as part of a plan to pay off creditors. The training slots will be sold to a consortium of health systems led by Thomas Jefferson University Hospitals for $55M. Hahnemann had previously agreed to sell the positions to Reading, PA-based Tower Health before they were outbid by the Jefferson consortium, who will keep the majority of the positions—and new physician labor—in the Philadelphia area.

The judge noted the difficulty of the decision, saying it was the kind of case that would “cause a judge to lie awake at night”. The ruling is huge win for debtors, and a blow to the Federal government, which strongly opposed the sale and has seven days to appeal.

Should it stand, the case could set the precedent that residents and the positions they hold are an asset that can be negotiated for and sold. Interns and residents provide low-cost labor that is essential for 24/7 coverage in many large hospitals, and the complex system of allocating and funding of residency training slots is a funds transfer from the Federal government to health systems.

Allowing hospitals to sell those slots to the highest bidder could undermine the stability of urban hospitals, particularly those who are investor-owned, as owners look to maximize short-term profits.