HCA to sell 4 Georgia hospitals for $950M

Tenet says it's on schedule to bring in $1B in proceeds through divestitures  - MedCity News

HCA Healthcare will divest four of its hospitals in Georgia for about $950 million, the Nashville, Tenn.-based hospital system said May 3. 

The for-profit provider will sell the four facilities to Piedmont Healthcare, a nonprofit health system based in Atlanta. 

The four hospitals are the 310-bed Eastside Medical Center in Snellville; the 119-bed Cartersville Medical Center; and the two-hospital Coliseum Health System, which includes 310-bed Coliseum Medical Centers in Mason and 103-bed Coliseum Northside in Mason. Piedmont will also assume ownership of a behavioral health facility owned by the Coliseum Health System. 

HCA said the transaction will provide strategic value as it increases its financial flexibility to invest in its core markets. 

The two health systems expect the transaction to close in the third quarter of 2021. It still needs regulatory approvals.

5 hospitals seeking to regain independence, split from systems

Catskill Center for Independence :: Home

Several hospitals are looking to split from the health system they belong to, regain independence or partner with a different healthcare organization.

Below are five instances reported since Jan. 1, beginning with the most recent:

1. 2 hospitals to part ways with U of Kansas Health System
HaysMed, a single-hospital system in Hays, Kan., and Pawnee Valley Community Hospital in Larned, Kan., will depart from the University of Kansas Health System in Kansas City.  University of Kansas Health System and the two hospitals said they decided that working independently “best supports the long-term health and wellness of our communities.”

2. North Carolina system to sever ties with Atrium
Carolinas HealthCare System Blue Ridge, a two-campus system in Morganton, N.C., plans to cut ties with Charlotte, N.C.-based Atrium Health. The hospital system said its board of directors approved a nonbinding letter of intent to instead become part of the Chapel Hill, N.C.-based UNC Health network through a management services agreement. 

3. California hospital seeks split from Providence: 6 things to know
Hoag Memorial Hospital Presbyterian in Newport Beach, Calif., is seeking to end its affiliation with Providence, a Catholic health system based in Renton, Wash. Hoag filed a lawsuit last year to split from the 51-hospital system.

4. Boone Hospital Center splits from BJC HealthCare April 1
Columbia, Mo.-based Boone Hospital Center became independent April 1, separating from St. Louis-based BJC HealthCare.

5. Washington hospital splits from Virginia Mason
Virginia Mason Memorial in Yakima, Wash., has transitioned back to an independent hospital and reverted to its old name. The board of Virginia Mason Memorial voted in late October to end its affiliation with Seattle-based Virginia Mason Health System. The hospital said it split from Virginia Mason because of the system’s merger with Tacoma, Wash.-based CHI Franciscan. 

Orange County Hospital Seeks Divorce From Large Catholic Health System

In early 2013, Hoag Memorial Hospital Presbyterian in Orange County, California, joined with St. Joseph Health, a local Catholic hospital chain, amid enthusiastic promises that their affiliation would broaden access to care and improve the health of residents across the community.

Eight years later, Hoag says this vision of achieving “population health” is dead, and it wants out. It is embroiled in a legal battle for independence from Providence, a Catholic health system with 51 hospitals across seven states, which absorbed St. Joseph in 2016, bringing Hoag along with it.

In a lawsuit filed in Orange County Superior Court last May, Hoag argues that remaining a “captive affiliate” of the nation’s 10th-largest health system, headquartered nearly 1,200 miles away in Washington state, constrains its ability to meet the needs of the local population.

Hoag doctors say that Providence’s drive to standardize treatment decisions across its chain — largely through a shared Epic electronic records system — often conflicts with their own judgment of best medical practices. And they recoil against restrictions on reproductive care they say Providence illegally imposes on them through its adherence to the Catholic health directives established by the United States Conference of Catholic Bishops.

“Their large widespread system is very different than the laser focus Hoag has on taking care of its community,” said Hoag CEO Robert Braithwaite. “When Hoag needed speed and agility, we got inadequate responses or policies that were just wrong for us. We found ourselves frustrated with a big health system that had a generic approach to health care.”

Providence insists it wants to stay with Hoag, a financial powerhouse — even as the two sides engage in secret settlement talks that could end the marriage.

“We believe we are better together,” said Erik Wexler, president of Providence South, which includes the group’s operations in California, Texas and New Mexico. “The best way to do that is to collaborate.” He cited joint investments in Hoag Orthopedic Institute and in Be Well OC, a kind of mental health collaborative, as fruits of the affiliation.

“If we are separate,” Wexler added, “there is a chance we may begin to cannibalize each other and drive the cost of care up.”

Research over the past several years, however, has shown that it is the consolidation of hospitals into fewer and larger groups, with greater bargaining clout, that tends to raise medical prices — often with little improvement in the quality of care.

“Mergers are a self-centered pursuit of stability by hospitals and hospital systems that hope to get so big that they can survive the anarchy of U.S. health care,” said Alan Sager, a professor at Boston University’s School of Public Health.

Wexler argued that price increases linked to consolidation are less of a worry in Orange County, geographically small but densely populated with 3.2 million residents and 28 acute care hospitals. Given the proximity of so many hospitals, Wexler said, counterproductive duplication of medical services is more of a concern.

Unlike many local community hospitals that seek larger partners to survive, Hoag, one of Orange County’s premier medical institutions, is financially robust and perfectly able to stand on its own. It has the advantage of operating in one of Orange County’s most affluent areas, with two acute care hospitals and an orthopedic specialty hospital in Newport Beach and Irvine. It is the beneficiary of numerous wealthy donors, including bond market billionaire Bill Gross and thriller novelist Dean Koontz.

In 2020, Hoag’s net assets, essentially its net worth, stood at about $3.3 billion — nearly 20% of the total for all Providence-affiliated facilities, even though Hoag has only three of the group’s 51 hospitals. Hoag generated operating income of $38 million last year, while Providence posted a $306 million operating loss.

But Providence is hardly a financial weakling. It is sitting on a mountain of unrestricted cash and investments worth $15.3 billion as of Dec. 31. And despite its hefty reserves, it received $1.1 billion in coronavirus relief grants last year under the federal CARES Act, and millions more from the Federal Emergency Management Agency.

Providence does not own Hoag, since no money changed hands and their assets were not commingled. But Providence is able to keep Hoag from walking away because it has a majority on the governing body that was set up to oversee the original affiliation with St. Joseph.

Hoag executives also express frustration at what they describe as efforts by Providence to interfere with their financial, labor and supply decisions.

Providence, in turn, worries that “if Hoag disaffiliates with Providence, it has the potential to impact our credit rating,” Wexler said.

Despite its insistence on the value of the affiliation, Providence officials are said to be willing to end the affiliation in exchange for payment of an undisclosed amount that Hoag considers unwarranted. Wexler and Hoag executives declined to comment on their discussions. A trial start date has not been set, but on April 26 the court will hear a motion from Hoag to expedite it.

While its financial fortitude distinguishes it from many other community hospitals tied to larger partners, Hoag’s experience with Providence is hardly uncommon amid widespread consolidation in the hospital industry and the growing influence of Catholic health care in the U.S.

“The bigger your parent organization becomes, the smaller your voice is within the system, and that’s part of what Hoag has been complaining about,” said Lois Uttley, director of the women’s health program at Community Catalyst, a Boston-based patient advocacy group that monitors hospital mergers.

“Compounding the problem is the fact that the system in this case is Catholic-run, because then, in addition to having an out-of-town system headquarters calling the shots, you also have to contend with governance from Catholic bishops,” Uttley said. “So you have two bosses, in a sense.”

Hoag is not the only hospital seeking to flee this dynamic. Last year, for example, Virginia Mason Memorial hospital in Yakima, Washington, said it would separate from its parent, Seattle-based Virginia Mason Health System, to avoid a pending merger with CHI Franciscan, part of the Catholic hospital giant CommonSpirit Health.

Mergers and acquisitions have led to the increasing dominance of mega hospital chains in U.S. health care over the past several years. From 2013 to 2018, the revenue of the 10 largest health systems grew 82%, compared with 45% for all other hospital groups, according to a recent study by Deloitte, the consulting and auditing firm.

Researchers expect the trend to accelerate as large health systems swallow smaller facilities economically weakened by the pandemic, and a growing trend toward outpatient care reduces demand for hospital beds.

Four of the 10 largest U.S. hospital systems are Catholic, including Chicago-based CommonSpirit Health, St. Louis-based Ascension, Livonia, Michigan-based Trinity Health and Providence. study by Community Catalyst found that 1 in 6 acute care hospital beds are in Catholic facilities, and that 52 hospitals operating under Catholic restrictions were the sole acute care facilities in their regions last year, up from 30 in 2013.

“We need to make this a national conversation,” said Dr. Jeffrey Illeck, a Hoag OB-GYN.

He was among a group of Hoag OB-GYNs who signed a letter to then-California Attorney General Xavier Becerra in October, alleging that Providence frequently declined to authorize contraceptive treatments, such as intrauterine devices and tubal ligations — in breach of the conditions imposed by Becerra’s predecessor, Kamala Harris, when she approved the original affiliation with St. Joseph in 2013.

In March, two weeks before he was confirmed as secretary of the U.S. Department of Health and Human Services, Becerra launched an investigation into those concerns.

Wexler said he is confident the attorney general’s probe will provide “clarity that Providence has done nothing wrong.”

A particularly bitter disagreement between the two sides concerns a rupture last year within St. Joseph Heritage Healthcare, a physician group belonging to Providence that included both St. Joseph and Hoag doctors. In November, the group notified thousands of patients that their Hoag specialists were no longer part of the network and that they needed to choose new doctors.

Wexler said that was the inevitable result of a decision by the Hoag physicians to negotiate separate HMO contracts, an assertion Braithwaite contested. The move disrupted patient care just as the winter covid surge was gaining momentum, he said.

Perhaps the biggest frustration for most Hoag administrators and physicians is Providence’s desire to standardize care across all 51 hospitals through their shared Epic electronic records system.

Hoag doctors say Providence controls the contents of the Epic system and that the care protocols in it, often driven by cost considerations, frequently collide with their own clinical decisions. Any changes must be debated among all the hospitals in the system and adopted by consensus — a laborious undertaking.

Dr. Richard Haskell, a cardiologist at Hoag, recalled a dispute over intravenous Tylenol, which Hoag’s orthopedists prefer because they say it works well and furthered a concerted effort to reduce opioid addiction. Providence took IV Tylenol off its list of accepted drugs, and the Hoag orthopedists “were very upset,” Haskell said.

They eventually got it back on that list, but with the condition that they could order it only one dose at a time. That meant nurses had to call the doctor every four hours for a new order. “Doctors probably felt, ‘Screw it, I don’t want to get woken up every four hours,’ so they probably just gave them narcotics,’” Haskell said.

He said that before agreeing to adopt Providence’s Epic system, Hoag had received written assurances it could make changes that included its preferred treatment choices for various conditions. But it quickly became clear that was not going to happen, he said.

“We couldn’t make any changes at all, so we were stuck with their system,” Haskell said. “I don’t want to be in a system bogged down by bureaucracy that requires 51 hospitals to vote on it.”

Wexler said Hoag understood exactly what it had signed up for. “They knew full well that there would be a collaborative approach across all of Providence, including Hoag, to make decisions on what standardizations would happen across the entire system,” he said. “It is not easy if one hospital wants to create its own specific pathway.”

Despite Hoag’s concerns about lesser standards of care, Braithwaite could not cite an example of an adverse outcome that had resulted from it. And Hoag’s strong reputation seems untarnished, as reflected in the high rankings and awards it continues to garner — and tout on its website.

Still, the affiliation’s days seem numbered. Hoag is no longer on the Providence website or in its marketing materials, and in many cases — such as the St. Joseph Heritage schism — the two groups are already going their separate ways.

“They are certainly acting like we are competitors, and I assume that means they know the disaffiliation is imminent,” Braithwaite said.

Wexler, while reiterating that Providence wants to maintain the current arrangement, was nonetheless able to imagine a different outcome: “What we would do post-affiliation,” he said, “is to continue to look for opportunities to collaborate.”

Troubled Pennsylvania health system looks for a buyer

Reading Hospital | Tower Health

West Reading, Pa.-based Tower Health is looking for a partner to buy the entire system, which comprises six hospitals, according to the Reading Eagle.

“We are compelled to pursue every possible avenue available to protect and preserve the future of care at all of our hospitals and facilities,” Tower said in a statement to The Philadelphia Inquirer on Feb. 26. “As part of this process, we will examine potential partnerships for the entire Tower Health system with like-minded health systems that share our same values and passion for clinical excellence.” 

The health system had previously said it was looking for buyers for its hospitals, with the exception of its flagship facility, Reading Hospital in West Reading, according to the Inquirer. 

On March 1, Tower Health was hit with a three-notch credit downgrade by Fitch Ratings. The credit rating agency said its long-term “B+” rating and negative outlook for the system reflect significant ongoing financial losses from the COVID-19 pandemic and operational challenges following the 2017 acquisition of five hospitals. 

S&P lowered its rating on Tower Health by two notches, to “BB-” from “BB+,” on March 2. 

Tower Health had operating losses of more than $415 million in fiscal year 2020, and it expects an operating loss of about $160 million in fiscal 2021, according to Fitch. 

Haven, the Amazon-Berkshire-JPMorgan venture to disrupt health care, is disbanding after 3 years

https://www.cnbc.com/2021/01/04/haven-the-amazon-berkshire-jpmorgan-venture-to-disrupt-healthcare-is-disbanding-after-3-years.html

Haven, the Amazon-Berkshire-JPMorgan venture to disrupt health care, is disbanding  after 3 years

KEY POINTS

  • Haven began informing employees Monday that it will shut down by the end of next month, according to people with direct knowledge of the matter.
  • Many of the Boston-based firm’s 57 workers are expected to be placed at Amazon, Berkshire Hathaway or JPMorgan Chase as the firms each individually push forward in their efforts, the people said.
  • One key issue facing Haven was that each of the three founding companies executed their own projects separately with their own employees, obviating the need for the joint venture to begin with, according to the people, who declined to be identified speaking about the matter.

Haven, the joint venture formed by three of America’s most powerful companies to lower costs and improve outcomes in health care, is disbanding after three years, CNBC has learned exclusively.

The company began informing employees Monday that it will shut down by the end of next month, according to people with direct knowledge of the matter.

Many of the Boston-based firm’s 57 workers are expected to be placed at AmazonBerkshire Hathaway or JPMorgan Chase as the firms each individually push forward in their efforts, and the three companies are still expected to collaborate informally on health-care projects, the people said.

The announcement three years ago that the CEOs of Amazon, Berkshire Hathaway and JPMorgan Chase had teamed up to tackle one of the biggest problems facing corporate America – high and rising costs for employee health care  – sent shock waves throughout the world of medicine. Shares of health-care companies tumbled on fears about how the combined might of leaders in technology and finance could wring costs out of the system.

The move to shutter Haven may be a sign of how difficult it is to radically improve American health care, a complicated and entrenched system of doctors, insurers, drugmakers and middlemen that costs the country $3.5 trillion every year. Last year, Berkshire CEO Warren Buffett seemed to indicate as much, saying that were was no guarantee that Haven would succeed in improving health care.

Shares of UnitedHealth GroupHumana and CVS Health each climbed more than 2% after the Haven news broke.

One key issue facing Haven was that while the firm came up with ideas, each of the three founding companies executed their own projects separately with their own employees, obviating the need for the joint venture to begin with, according to the people, who declined to be identified speaking about the matter.

Coming just three years after the initial rush of fanfare about the possibilities for what Haven could accomplish, its closure is a disappointment to some. But insiders claim that it will allow the founding companies to implement ideas from the project on their own, tailoring them to the specific needs of their employees, who are mostly concentrated in different cities.

The move comes after Haven’s CEO, Dr. Atul Gawande, stepped down from day-to-day management of the nonprofit in May, a change that sparked a search for his successor.

Brooke Thurston, a spokeswoman for Haven, confirmed the company’s plans to close and gave this statement:

The Haven team made good progress exploring a wide range of healthcare solutions, as well as piloting new ways to make primary care easier to access, insurance benefits simpler to understand and easier to use, and prescription drugs more affordable,” Thurston said in an email.

Moving forward, Amazon, Berkshire Hathaway, and JPMorgan Chase & Co. will leverage these insights and continue to collaborate informally to design programs tailored to address the specific needs of our individual employee populations and locations,” she said.

Billionaire sells $109M of CHS stock

Chinese billionaire with ambitions to reshape investment models | Financial  Times

Chinese investor Tianqiao Chen and his group of companies have a 12.2 percent stake in Franklin, Tenn.-based Community Health Systems after selling nearly 13 million shares of the company in the past month, according to Securities and Exchange Commission filings. 

Mr. Chen and his Shanda Group company affiliates sold 3.4 million shares of CHS on Dec. 14 for between $8.50 and $8.71 per share, bringing in a total of $28.5 million. The move comes after he sold 5 million shares of CHS from Nov. 10-12 and another 4.6 million shares Nov. 23. Those sales brought in a total of $81.2 million.

Mr. Chen, a pioneer in China’s online gaming industry, began buying up shares of CHS in 2016. The last public comment the investor made about CHS was in 2018, when Shanda Group said it had a “good relationship” with CHS and supported the company’s strategy and management team. 

Chinese billionaire sells additional $40M of CHS stock

Chinese billionaire with ambitions to reshape investment models | Financial  Times

Chinese investor Tianqiao Chen and his group of companies have a 14.96 percent stake in Franklin, Tenn.-based Community Health Systems after recently selling nearly 4.6 million shares of the company, according to a Securities and Exchange Commission filing.

Mr. Chen and his Shanda Group company affiliates sold the shares Nov. 23 for between $8.66 and $9.08 per share, bringing in a total of $39.8 million. The move comes after he sold 5 million shares of CHS from Nov. 10-12 for $41.46 million.  

Mr. Chen, a pioneer in China’s online gaming industry, began buying up shares of CHS in 2016. The last public comment the investor made about CHS was in 2018, when Shanda Group said it had a “good relationship” with CHS and supported the company’s strategy and management team.

Mednax sells off its radiology division

https://mailchi.mp/365734463200/the-weekly-gist-september-11-2020?e=d1e747d2d8

M&A Analysis: Mednax to Sell its Radiology and Teleradiology Business -

National physician staffing firm Mednax announced the sale of its radiology practice—which includes teleradiology company Virtual Radiologic, known as vRad—to venture-backed Radiology Partners for $885M.

Publicly-traded Mednax has been hit hard by both contracting disputes with UnitedHealthcare, as well as pandemic-related volume declines. Both its anesthesiology and radiology businesses suffered big losses with the halt of elective procedures in the spring, and saw volumes decline between 50-70 percent compared to the prior year.

The company began divesting in May with the sale of its anesthesiology division to investor-backed North American Partners in Anesthesia. Mednax leaders say these decisions to sell were made independent of the pandemic, and that they have been planning to return to the company’s roots of focusing exclusively on obstetrics and pediatric subspecialty care, including changing its name back to Pediatrix.

Acquiring firm Radiology Partners is the largest radiology practice in the country, working with 1,300 hospitals and healthcare facilities. With this acquisition, it will have 2,400 radiologists practicing in all 50 states and the District of Columbia.

Hospital-based physician staffing firms have been especially hard hit by COVID-induced volume declines. This has created a softening in valuations and opened the door for investment firms to accelerate practice purchases.

We expect the pace of deals to quicken as independent practices experience continued financial strain—with large national groups leading the way, taking advantage of lower practice prices to build large-scale specialty enterprises.

 

 

 

 

Trinity Health sees net income plunge 60% as operating margin improves

https://www.beckershospitalreview.com/finance/trinity-health-sees-net-income-plunge-60-as-operating-margin-improves.html

Image result for trinity health headquarters

Trinity Health recorded higher revenue and operating income in the first quarter of fiscal year 2020 than in the same period a year earlier, but the Livonia, Mich.-based system ended the quarter with lower net income, according to unaudited financial documents.

During the first quarter of fiscal 2020, which ended Sept. 30, Trinity reported operating revenue of $4.8 billion, a 1.8 percent increase over the same period of the year prior. Operating expenses climbed 1.7 percent year over year to $4.7 billion.

Trinity ended the first quarter of fiscal 2020 with operating income of $94 million, up from $87 million in the first quarter of last year.

The system reported an operating margin of 2 percent in the first quarter of fiscal 2020, compared to an operating margin of 1.8 percent in the same period of the year prior. Margin growth was partially attributable to Trinity’s divestiture of Camden, N.J.-based Lourdes Health System in June. Growth in patient volumes and payment rates also supported margin growth.

After factoring in nonoperating items, including a decline in investment returns, Trinity reported net income of $166.4 million in the first quarter of fiscal 2020. That’s compared to the first quarter of fiscal 2019, when the system posted net income of $419.9 million.

 

 

Has Community Health Systems Finally Bottomed Out?

https://www.healthleadersmedia.com/strategy/has-community-health-systems-finally-bottomed-out

After selling more than 80 hospitals in three years, leaders of the large for-profit hospital operator are suggesting the worst may be behind them.


KEY TAKEAWAYS

The troubled operator of rural hospitals is focusing now on growth-oriented markets.

The latest round of questions and accusations adds to the tumultuous past five years.

Some analysts say CHS isn’t poised for where the market is headed: outpatient services and value-based care.

Times have been tough for Community Health Systems Chairman and CEO Wayne T. Smith, who is voicing an optimistic message this year as the hospital operator continues to navigate choppy waters.

Smith and fellow CHS senior executives told investors this month that the company expects to complete its massive and long-running divestiture plan by the end of 2019, having already shed 81 hospitals from its portfolio in the three preceding years. The company, based in Franklin, Tennessee, operated 106 hospitals across 18 states as of the end of the first quarter.

While the divestitures give CHS cash to pay down its debt, they are also part of a strategic effort to align CHS operations with the geographic areas where the company sees the greatest growth potential, Smith said.


“This has allowed the company to shift more of our resources to more sustainable markets, ones with better population growth, better economic growth, and lower unemployment, which provides us an opportunity for sustainable growth,” Smith said during the first-quarter earnings call this month.

“As we complete additional divestitures, we expect our same-store metrics to further improve,” he added. “This will lead to not only additional debt reduction but also better cash flow performance and lower leverage ratios.”

Executive Vice President and Chief Financial Officer Thomas J. Aaron echoed that message at the Goldman Sachs Leveraged Finance Conference this month. While CHS was truly a rural hospital company 15 years ago, Aaron said the post-selloff organization is investing strategically in markets where it anticipates growth.

“We’d rather compete in a growing pie than have more market share in a pie that’s shrinking,” Aaron said.

“We feel like we’re well-positioned,” he said.

But the positive forecast is a bit of a tough sell, especially when you consider how bad the past five years have been:

  • Questionable HMA Acquisition: In 2014, CHS completed its $7.6 billion acquisition of Florida-based hospital operator Health Management Associates, Inc. (HMA), in what is widely viewed in hindsight as a bad move. In addition to a $260 million settlement with the U.S. Department of Justice, a subsidiary of HMA pleaded guilty to criminal fraud last year for alleged misconduct that predated the acquisition by CHS—allegations that Smith knew about before the deal was final. “We were aware of the issues they had,” Aaron said this month. “We went ahead and closed on the transaction, confident that we could get the cost synergy, and we felt like they had some great assets.”
  • Major Stock Market Woes: In 2015, the price of CHS shares peaked at nearly $53 apiece, according to New York Stock Exchange data. But by the end of that year, shares had lost more than half of that value. Share prices continued to slide the following year and haven’t made a meaningful recovery since. They have been trading below $5 so far this year.
  • Lackluster Quorum Spin-off: In 2016, CHS spun off 38 hospitals to form Quorum Health Corporation. The spin-off severely underperformed expectations, and investors began asking questions. Quorum formally responded to those investors with a letter that acknowledged several reasons to question the “operational competence” of CHS leaders who backed the spin-off. A related dispute between Quorum and CHS ended in arbitration earlier this year.
  • Ongoing Hospital Divestitures: In 2017, CHS sold 30 hospitals, followed by another 13 hospitals in 2018, Aaron said. So far this year, CHS has announced the sale of at least seven more: one in Tennessee, two in Florida, and four in South Carolina. A spokesperson for CHS did not respond to HealthLeaders‘ request for additional information and comment.
  • Recurring Bankruptcy Questions: Industry analysts have wondered for years whether bankruptcy may be on the horizon for CHS. Those questions were renewed again this month when Ryan Heslop, a portfolio manager for Firefly Value Partners LP, took a short position against the company and said a CHS bankruptcy is likely in the next few years, as Reuters reported. About that same time, Smith invested more than $3 million in CHS stock, according to two Securities and Exchange Commission filings. (Smith, 73, who has been CEO for 22 years, now directly and indirectly controls about 2.8% of the company, as the Nashville Post reported.)
  • Call for CEO’s Ouster: With the release of a report this month titled “Other People’s Money,” the National Nurses United (NNU) group accused Smith of squandering CHS’ assets and called for him to be removed. “The fact that Smith remains at CHS’ helm, given a series of fatal calculations that set the company on a downward spiral, is a real wonder,” the NNU report states. Shareholders, however, voted overwhelmingly in favor of keeping Smith as a director and significantly increasing his incentive plan compensation, according to SEC filings.

Despite the light-at-the-end-of-the-tunnel rhetoric coming from CHS executives, there’s still real concern the company could come undone. That’s because CHS’ problems run deeper than its balance sheets, says Mark Cherry, MFA, a principal analyst at Market Access Insights for Decision Resources Group.

“Given the national trend toward provider consolidation, CHS might not remain intact even if it were financially healthy,” Cherry tells HealthLeaders in an email, adding that CHS seems to be unsuited for the industry’s ongoing shifts toward value-based payments and outpatient care delivery.

“There are only a few markets, like Scranton, Knoxville, and Northwest Arkansas, where CHS has enough presence to act as a stand-alone health system that can influence physician and patient behaviors,” Cherry says.

The structural problem is rooted in a bad strategic bet a decade ago, Cherry says.

“As markets and regions were coalescing around large integrated delivery networks focused on value-based care, CHS continued to invest in suburban facilities and demand high fee-for-service reimbursement,” Cherry says.

“Whereas operating a couple of suburban hospitals within a larger market once gave CHS access to better insured patients and leverage against payers who wanted to offer broad provider networks, the post-ACA landscape does not have as wide a uninsured discrepancy between urban and suburban areas,” he adds, “and payers are shifting to high-performance narrow networks, allowing them to cut CHS facilities out entirely if they are unwilling to compromise.