Category Archives: Health System

Hospital Price Transparency: Is the Juice worth the Squeeze?

Posted on by • Posted in American Hospital Association (AHA), Health System, Hospital, Hospital Industry, Price Transparency, Rand Corporation • Leave a comment
Hospital Price Transparency: Is the Juice worth the Squeeze?

Last week, RAND issued its latest assessment of hospital prices concluding…

“In 2022, across all hospital inpatient and outpatient services (including both facility and related professional claims), employers and private insurers paid, on average, 254% of what Medicare would have paid for the same services at the same facilities. State-level median prices have remained stable across the past three study rounds: 254 %of Medicare prices in 2018 (Round 3), 246%in 2020 (Round 4), and 253% in 2022 (Round 5—the current study).”

Like clockwork, the American Hospital Association issued its “Rebuke” of the report:

“In what is becoming an all too familiar pattern, the RAND Corporation’s latest hospital price report oversells and underwhelms. Their analysis — which despite much heralded data expansions — still represents less than 2% of overall hospital spending. This offers a skewed and incomplete picture of hospital spending. In benchmarking against woefully inadequate Medicare payments, RAND makes an apples-to-oranges comparison that presents an inflated impression of what hospitals are actually getting paid for delivering care while facing continued financial and other operational challenges. 

In addition to the ongoing flaw of relying on a self-selected sample of data, their analysis is suspiciously silent on the hidden influence of commercial insurers in driving up health care costs for patients….”

It’s the 5th Edition of RAND’s Employer Transparency Report, each featuring slight methodology changes using Sage Transparency Commercial Claims Data developed for the Employer Forum of Indiana.

The debate over hospital prices is not new nor is RAND the only investigator. Since the Trump administration enacted its Executive Order 13877 (Improving Price and Quality Transparency in American Healthcare) June 24, 2019, numerous organizations have introduced price transparency tools to enable hospital price shopping i.e. Turquoise, Milliman, Leapfrog et al. The Biden administration continued the rule increasing its penalties for non-compliance and Congress has passed 3 laws with bipartisan support widening its application.

However, best-case results reflected as articulated by Larry Levitt, senior vice president of the Kaiser Family Foundation, have not been realized:

“App developers will go crazy developing shopping tools for patients, and patients will use those tools to search for the best deals. The public availability of prices will shame high-priced hospitals into lowering their prices because they’ll be so embarrassed.”

My take:

Academic researchers and economists have concluded that hospital price transparency has not led to reduced heath spending overall nor lower hospital prices. Per a recent systematic review: “No evidence was found for impact on the outcomes volume, availability or affordability. The overall lack of evidence on policies promoting price transparency is a clear call for further research…  Price-aware patients chose less costly services that led to out-of-pocket cost savings and savings for health insurers; however, these savings did not translate into reductions in aggregate healthcare spending.  Disclosure of list prices had no effect, however disclosure of negotiated prices prompted supply-side competition which led to decreases in prices for shoppable services.”

Per Wall Street Journal actuaries, hospital price increases account for 23% of annual health spending increases but vary widely based on factors other than their underlying costs. Determining how hospital prices are set remains beyond the scope of conventional pricing models.

Nonetheless, hospital price transparency is here to stay: public attention is likely to grow and sources– both accurate and misleading– will multiply. It’s safe for elected officials because it’s popular with voters. Per Patient Rights Advocate survey (December 2023), 93% of adults think hospitals should be required to post all prices ahead of scheduled services. It’s clearly seen as foundational to the Federal Trade Commission doctrines of consumer protection and competition. And it’s important to privately insured consumers—the majority of Americans– since 73% of their claims are for “shoppable services” though they trust payers more than hospitals for estimates of their out-of-pocket obligations in these transactions (61% vs. 22%).

In July 2018, I wrote:” Arguing price transparency in healthcare is a misguided effort is like arguing against clean air and healthy eating: it’s senseless.” It’s still true. Making the case that price transparency has a long way to go based on current offerings and utilization is legitimate.

The price transparency movement is gaining momentum in healthcare: though it still lacks widespread impact on spending today, it soon will.”

Hospitals are 30% of total U.S. health spending and almost 40% of the population uses at least one hospital service every year. Promoting “whole person care,” while touting quality war while disregarding affordability and price transparency for consumers seems inconsistent.  Enabling consumers to easily access accurate prices—not just out-of-pocket estimates– is imperative for hospitals seeking long-term relevance and sustainability. And state and federal lawmakers, along with employers, should structure benefits that reward consumers directly for shopping discipline instead of allowing insurers to benefit alone.

Is the Juice worth the Squeeze for hospital price transparency efforts? To date, proponents say yes, opponents say no, and each side has valid concern about use by consumers. But unless one believes the role of consumers as purchasers and users of the system’s service will diminish in coming years, the safe bet is hospital price transparency will play a bigger role.

Medicare Advantage two-midnight rule contributing to higher outpatient revenues

Posted on by • Posted in Center for Medicare and Medicaid Services (CMS), Health System, Hospital, Hospital Industry, Medicare, Medicare Advantage, Medicare Two-Midnight Rule • Leave a comment
https://www.healthcarefinancenews.com/news/medicare-advantage-two-midnight-rule-contributing-higher-outpatient-revenues?leadId=1234536&utm_source=newsletter&utm_medium=email&utm_campaign=&utm_content=&utm_term=&mkt_tok=NDIwLVlOQS0yOTIAAAGTNKIURyRJUHHpzSSrs-id9wxx4pP5QfreBWnLLm0nrrNFEHmKKfzpdIptxEMlg6YNUNf7_uAhPPdDvli-fqv2aZOxSrzNW2kSW2A_kRyLPro

More than 20% of Medicare Advantage patients could be affected by the rule, report finds.

The Centers for Medicare and Medicaid Services’ January expansion of the two-midnight rule to include Medicare Advantage plans has contributed to higher inpatient volumes and revenue growth in the first quarter of the year, according to a Strata Decision Technology report.

This is because inpatient services have higher reimbursement levels compared to outpatient services and the two-midnight rule concerns inpatient care.

CMS published the final rule in April 2023, which for the first time expanded the rule to include Medicare Advantage plans. The rule requires patients to be admitted as an inpatient if the treating clinician determines they require hospital care that extends beyond two midnights, rather than being held under observation status as an outpatient.

The expansion now includes more than 30 million people enrolled in Medicare Advantage managed care plans. Prior to the final rule, the two-midnight rule only explicitly applied to traditional Medicare.

More than 20% of Medicare Advantage patients could be affected by the rule, the report found. An analysis of Medicare Advantage encounters from 2023 – before the rule was expanded to those patients – found that 22.3% were held in observation status for two days or more. By comparison, 8.7% of Medicare patients and 11.3% of patients covered by commercial plans had observation lengths of stay of two days or more in 2023.

WHAT’S THE IMPACT?

Looking at trends in hospital gross revenues, year-over-year growth in inpatient revenue surpassed outpatient revenue in March for the first time in more than two years. Inpatient revenue rose 3.7% versus March 2023, while outpatient revenue was up 2.4% year-over-year.  Overall gross operating revenue increased 3.1% and 2.2% over the same periods, respectively.

March marked the 11th consecutive month of year-over-year increases for all three metrics, which contributed to stronger margins in recent months, data showed.

Revenue growth varied widely for hospitals in different regions. For example, hospitals in the Northeast and Mid-Atlantic areas saw inpatient revenue jump 5.4% year-over-year in March, while outpatient revenue was nearly flat, down just 0.1%.

Adjusted revenues increased year-over-year, but were down month-over-month. Net patient service revenue per adjusted discharge increased 2.5% year-over-year, and decreased 1.7% versus the previous month, while NPSR per adjusted patient day rose 4.9% from March 2023 to March 2024, and was down 0.5% from February to March 2024.

Hospital operating margins showed strong performance throughout the first quarter. The median year-to-date operating margin was 4.7% for the month, down slightly from a peak of 5.2% in January, but up significantly compared to margins of less than 1% in early 2023.

While actual operating margin increased overall, the median change in the metric was nearly flat both year-over-year and month-over-month when looking at the national data. The median change in operating margin decreased 0.1 percentage point from March 2023 to March 2024, and was down 0.3 percentage point compared to February 2024. The median change in operating earnings before interest, taxes, depreciation, and amortization (EBITDA) margin decreased 0.4% year-over-year and 0.5% versus the prior month.

THE LARGER TREND

CMS initially implemented the two-midnight Rule for Medicare in 2013 to help remove barriers to patients receiving medically necessary care.

Medicare’s two-midnight rule states that inpatient services are generally payable under Medicare Part A if a physician expects a patient to require medically necessary hospital care that spans at least two midnights.

Jefferson, Lehigh Valley Health Network ink definitive agreement to merge

Posted on by • Posted in Definitive Agreement, Health System, Hospital, Hospital Industry, Letter of Intent, Market Consolidation, Market Power, Mergers & Acquisitions • Leave a comment
https://www.beckershospitalreview.com/hospital-transactions-and-valuation/jefferson-lehigh-valley-health-network-ink-definitive-agreement-to-merge.html?origin=CFOE&utm_source=CFOE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

Philadelphia-based Jefferson and Allentown, Pa.-based Lehigh Valley Health Network have signed a definitive agreement to merge into a 30-hospital system with more than 700 care sites. 

The two shared plans to unite in December after signing a non-binding letter of intent.

Under the agreement, Jefferson and LVHN will integrate identity, clinical care and operations. The integrated system will comprise more than 65,000 employees and offer new educational opportunities to existing physicians and allow for recruitment opportunities, according to a joint May 15 news release.

The merger will also expand health plan access and improve financial stability that will allow for more investments and new technologies and improved patient outcomes.

Jefferson CEO Joseph Cacchione, MD, will maintain his existing role upon the transaction closure. LVHN president and CEO Brian Nester, DO, will serve as executive vice president and COO of Jefferson and president of the legacy LVHN. He will report to Dr. Cacchione, according to the release.

Baligh Yehia, MD, will serve as Jefferson’s executive vice president and chief transformation officer. Dr. Yehia will also serve as president of the legacy Jefferson health and report to Dr. Cacchione. 

An integrated leadership team and board of trustees will comprise leaders from both health systems.

Jefferson and LVHN will operate as independent parties until the merger, the release said. 

Hospitals charged employers and insurers 254% more than Medicare in 2022: study

Posted on by • Posted in American Hospital Association (AHA), Health System, High Prices, Hospital, Hospital Industry, Medicare Reimbursement, Price Transparency, Rand Corporation • Leave a comment
https://www.healthcaredive.com/news/hospitals-charge-employers-insurers-more-Medicare-Rand/715943/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202024-05-15%20Healthcare%20Dive%20%5Bissue:62072%5D&utm_term=Healthcare%20Dive

Hospitals with larger market shares were among the worst offenders, the Rand Corporation found.

Dive Brief:

  • Employers and private insurers continue to pay hospitals more for inpatient and outpatient services than Medicare would have reimbursed, according to a new study from policy think tank the Rand Corporation.
  • In 2022, private insurers and employers paid on average 254% of what Medicare would have paid for the same care services — up from 224% two years prior. 
  • Health systems often argue they hike up commercial rates to offset losses from government underpayments, according to the study. However, a hospital’s market share, rather than population of Medicare or Medicaid patients, more accurately predicted pricing, with larger health systems charging higher prices.

Dive Insight:

Since 2021, health systems and insurers have been required to post pricing information for their 300 most common procedures as the government pushes to make healthcare prices more transparent.

However, researchers have accused hospitals and insurers of failing to fully comply with the regulations. 

Only 34.5% of 2,000 hospitals reviewed by nonprofit watchdog organization Patient Rights Advocate were deemed fully compliant with price transparency rules as of January. But, the CMS had only issued 14 civil monetary penalty notices to noncompliant hospitals as of February, according to the nonprofit.

The Rand study found inpatient prices for hospital services were 255% above what Medicare paid in 2022 while outpatient hospital service prices averaged 289%, according to the report, which was based on an analysis of 4,000 hospitals across 49 states. 

Prices for services at outpatient ambulatory surgical centers was slightly lower at 170% of Medicare payments.

There were also differences in pricing by geography. Arkansas, Iowa, Massachusetts, Michigan and Mississippi kept relative prices below 200% of Medicare prices during the study period. However, others had relative prices above 300% of Medicare. Hospitals in Florida and Georgia negotiated the highest relative rates.

Price transparency could be a tool for administrators of employer-sponsored plans to better negotiate employee benefits. Although employer-sponsored plans cover 160 million Americans, researchers said employers operate at a disadvantage when negotiating prices with providers and insurers due to a lack of detailed pricing information.

“The widely varying prices among hospitals suggests that employers have opportunities to redesign their health plans to better align hospital prices with the value of care provided,” said Brian Briscombe, lead researcher for the Rand hospital price transparency project, in a statement. “However, price transparency alone will not lead to changes if employers do not or cannot act upon price information.”

State and federal policymakers could rebalance negotiations by cracking down on noncompetitive healthcare markets, placing limits on payments for out-of-network hospital care or allowing employers to buy into Medicare or other public options, the report said.

The nation’s largest hospital lobby, the American Hospital Association, has rejected previous analyses of pricing data — including reports from Patient Rights Advocate.

On Monday, Molly Smith, AHA’s vice president for policy, pushed back against the Rand study, saying it was “suspiciously silent on the hidden influence of commercial insurers in driving up health care costs for patients, as evidenced by issues like the recent concerning allegations against MultiPlan.”

Last week, Community Health Systems filed suit against MultiPlan alleging it had colluded with insurers to raise prices for patients and lower payments to providers. The lawsuit is the third against MultiPlan in under a year.

Kaiser rides completed Geisinger acquisition to $7.4B income in Q1

Posted on by • Posted in Financial Performance, Financial Reporting, Geisinger Health, Health System, Kaiser Permanente, Net Income, Operating Expenses, Operating Income, Operating Margin, Operating Margin Drivers, Operating Performance, Risant Health • Leave a comment
https://www.healthcaredive.com/news/kaiser-earnings-first-quarter-geisinger-acquisition/716060/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202024-05-15%20Healthcare%20Dive%20%5Bissue:62072%5D&utm_term=Healthcare%20Dive

However, the nonprofit provider and health plan warned subsequent quarters may be less profitable as expenses are projected to climb.

Dive Brief:

  • Nonprofit hospital and health plan giant Kaiser Permanente reported a $7.4 billion net gain for the first quarter ended March 31, compared to an income of $1.2 billion reported in the same period last year.
  • The Oakland, California-based operator’s earnings were boosted by its completed acquisition of Geisinger Health, which netted Kaiser a one-time operating gain of $4.6 billion. 
  • Kaiser reported a quarterly operating margin of 3.4%, but noted the first quarter tends to be its strongest due to the timing of the open enrollment cycle. Kaiser predicts revenues will remain steady during subsequent quarters but expenses will likely rise.

Dive Insight:

Kaiser operates 40 hospitals, according to its website, and serves nearly 12.6 million health plan members as of the first quarter.

During the quarter, Kaiser subsidiary Risant Health — a nonprofit health network created last year to independently buy and operate other nonprofit health systems — completed its purchase of Geisinger Health. Kaiser received a one-time payment, boosting earnings. Net income for the quarter excluding the Geisinger transaction was $2.7 billion. 

Kaiser increased its operating income year over year by more than 300% to total $935 million. Still, the nonprofit provider said that figure fell short of income logged prior to the pandemic. 

Continued cost pressures from high utilization, care acuity and rising prices of goods and services drove quarterly expenses up 6% year over year to total $26.5 billion.

Kaiser has conducted at least three rounds of layoffs since the fall. It most recently cut 76 employees at the beginning of this month, a spokesperson confirmed to Healthcare Dive. 

The cuts were done to “reduce costs across our organization,” and primarily impacted information technology and marketing roles, the spokesperson said via email.

Kaiser is not on a hiring freeze, the spokesperson noted. The organization has increased headcount by 5% since 2022 and has open positions currently listed online.

The Wall Street Journal also reported this weekend that Kaiser is attempting to sell $3.5 billion of its private investment holdings due to liquidity issues, citing sources familiar. Kaiser may attempt to sell further holdings later in 2024, according to the report.

Kaiser did not respond to requests for comment by press time about the possible sale.

Missing payments increase for hospitals: Report

Posted on by • Posted in Health System, Hospital, Hospital Industry, Payment Delays, Payment Processing Services, Study • Leave a comment
https://www.beckershospitalreview.com/finance/missing-payments-increase-for-hospitals-report.html?origin=CFOE&utm_source=CFOE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

During the first quarter of 2024, hospitals and health systems across the nation experienced a rise in payments that were either delayed or missing, a report from Strata Decision Technology found. 

The rise was largely due to a significant disruption in payment processing services, according to the report which integrated financial, operational and claims information sourced from hospitals, health systems and various other healthcare entities nationwide in order to assess performance trends.

Additionally, the report found that depending on the size of the hospital, the gap between expected and actual revenue ranged from 16.5% to 17.9% for the first three months of 2024. 

Large hospitals with operating expenses exceeding $2.5 billion experienced the most significant impacts in terms of percentage, according to the report. These hospitals saw a starting shortfall of 12.2% for services provided in January, which then increased to 20.3% in February and peaked at 21.1% in March, averaging 17.9% over the three-month period. 

According to Strata, this indicates a substantial financial challenge for these institutions, particularly considering that payments can take several weeks to process after the date of service.

Smaller hospitals with less than $500 million yearly operating costs were the next most affected group. On average, they had a 17.1% deficit for the quarter. This gap grew from 12% in January to 20.4% by March.

Hospitals at a Crossroad: Reactive Navigation or Proactive Orchestration?

Posted on by • Posted in 2024 Election Issues, American Hospital Association (AHA), Bankruptcy, Board, Financial Stewardship, Financial Viability, Financially Distressed, Health System, Healthcare Reform, Hospital, Hospital Industry, Leadership, Leadership Investment, Leadership Problem Solving, Leadership Transformation, Leadership Vision, Medicaid, Medicare, Public Opinion, Public Perception, Utilization Trends • Leave a comment
Hospitals at a Crossroad: Reactive Navigation or Proactive Orchestration?

This is National Hospital week. It comes at a critical time for hospitals:

The U.S. economy is strong but growing numbers in the population face financial insecurity and economic despair. Increased out-of-pocket costs for food, fuel and housing (especially rent) have squeezed household budgets and contributed to increased medical debt—a problem in 41% of U.S. households today. Hospital bills are a factor.

The capital market for hospitals is tightening: interest rates for debt are increasing, private investments in healthcare services have slowed and valuations for key sectors—hospitals, home care, physician practices, et al—have dropped. It’s a buyer’s market for investors who hold record assets under management (AUM) but concerns about the harsh regulatory and competitive environment facing hospitals persist. Betting capital on hospitals is a tough call when other sectors appear less risky.

Utilization levels for hospital services have recovered from pandemic disruption and operating margins are above breakeven for more than half but medical inflation, insurer reimbursement, wage increases and Medicare payment cuts guarantee operating deficits for all. Complicating matters, regulators are keen to limit consolidation and force not-for-profits to justify their tax exemptions. Not a pretty picture.

And, despite all this, the public’s view of hospitals remains positive though tarnished by headlines like these about Steward Health’s bankruptcy filing last Monday:

The public is inclined to hold hospitals in high regard, at least for the time being. When asked how much trust and confidence they have in key institutions to “to develop a plan for the U.S. health system that maximizes what it has done well and corrects its major flaws,” consumers prefer for solutions physicians and hospitals over others but over half still have reservations:

A Great DealSomeNot Much/None
Health Insurers18%43%39%
Hospitals27%52%21%
Physicians32%53%15%
Federal Government14%42%44%
Retail Health Org’s21%51%28%

The American Hospital Association (AHA) is rightfully concerned that hospitals get fair treatment from regulators, adequate reimbursement from Medicare and Medicaid and protection against competitors that cherry-pick profits from the health system.

It can rightfully assert that declining operating margins in hospitals are symptoms of larger problems in the health system: flawed incentives, inadequate funding for preventive and primary care, the growing intensity of chronic diseases, medical inflation for wages, drugs, supplies and technologies, the dominance of ‘Big Insurance’ whose revenues have grown 12.1% annually since the pandemic and more. And it can correctly prove that annual hospital spending has slowed since the pandemic from 6.2% (2019) to 2.2% (2022) in stark contrast to prescription drugs (up from 4% to 8.4% and insurance costs (from -5.4% to +8.5%). Nonetheless, hospital costs, prices and spending are concerns to economists, regulators and elected officials.

National health spending data illustrate the conundrum for hospitals: relative to the overall CPI, healthcare prices and spending—especially outpatient hospital services– are increasing faster than prices and spending in other sectors and it’s getting attention: that’s problematic for hospitals at a time when 5 committees in Congress and 3 Cabinet level departments have their sights set on regulatory changes that are unwelcome to most hospitals.

My take:

The U.S. market for healthcare spending is growing—exceeding 5% per year through the next decade. With annual inflation targeted to 2.0% by the Fed and the GDP expected to grow 3.5-4.0% annually in the same period, something’s gotta’ give. Hospitals represent 30.4% of overall spending today (virtually unchanged for the past 5 years) and above 50% of total spending when their employed physicians and outside activities are included, so it’s obvious they’ll draw attention.

Today, however, most are consumed by near-term concerns– reimbursement issues with insurers, workforce adequacy and discontent, government mandates– and few have the luxury to look 10-20 years ahead.

I believe hospitals should play a vital role in orchestrating the health system’s future and the role they’ll play in it. Some will be specialty hubs. Some will operate without beds. Some will be regional. Some will close. And all will face increased demands from regulators, community leaders and consumers for affordable, convenient and effective whole-person care.

For most hospitals, a decision to invest and behave as if the future is a repeat of the past is a calculated risk. Others with less stake in community health and wellbeing and greater access to capital will seize this opportunity and, in the process, disable hospitals might play in the process.

Near-term reactive navigation vs. long-term proactive orchestration–that’s the crossroad in front of hospitals today. Hopefully, during National Hospital Week, it will get the attention it needs in every hospital board room and C suite.

PS: Last week, I wrote about the inclination of the 18 million college kids to protest against the healthcare status quo (“Is the Health System the Next Target for Campus Unrest?” The Keckley Report May 6, 2024 www.paulkeckley.com). This new survey caught my attention:

According to the Generation Lab’s survey of 1250 college students released last week, healthcare reform is a concern. When asked to choose 3 “issues most important to you” from its list of 13 issues, healthcare reform topped the list. The top 5:

  1. Health Reform (40%)
  2. Education Funding and access (38%)
  3. Economic fairness and opportunity (37%)
  4. Social justice and civil rights (36%)
  5. Climate change (35%)

If college kids today are tomorrow’s healthcare workforce and influencers to their peers, addressing the future of health system with their input seems shortsighted. Most hospital boards are comprised of older adults—community leaders, physicians, et al.

And most of the mechanisms hospitals use to assess their long-term sustainability is tethered to assumptions about an aging population and Medicare. 

College kids today are sending powerful messages about the society in which they aspire to be a part. They’re tech savvy, independent politically and increasingly spiritual but not religious. And the health system is on their radar.

30 health systems with strong finances

Posted on by • Posted in Credit Quality, Credit Ratings, Financial Performance, Financial Ratios, Financial Reporting, Financial Reserves, Financial Stewardship, Financial Strength, Financial Viability, Health System, Liquidity, Operating Expenses, Operating Income, Operating Margin, Operating Margin Drivers, Operating Metrics, Operating Performance, Operating Revenue • Leave a comment
https://www.beckershospitalreview.com/finance/20-health-systems-with-strong-finances.html?origin=CEOE&utm_source=CEOE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

Here are 30 health systems with strong operational metrics and solid financial positions, according to reports from credit rating agencies Fitch Ratings and Moody’s Investors Service released in 2024.

Avera Health has an “AA-” rating and a stable outlook with Fitch. The rating reflects the Sioux Falls, S.D.-based system’s strong operating risk and financial profile assessments, and significant size and scale, Fitch said.  

Cedars-Sinai Health System has an “AA-” rating and a stable outlook with Fitch. The rating reflects the Los Angeles-based system’s consistent historical profitability and its strong liquidity metrics, historically supported by significant philanthropy, Fitch said. 

Children’s Health has an “Aa3” rating and stable outlook with Moody’s. The rating reflects the Dallas-based system’s continued strong performance from a focus on high margin and tertiary services, as well as a distinctly leading market share, Moody’s said.    

Children’s Hospital Medical Center of Akron (Ohio) has an “Aa3” rating and stable outlook with Moody’s. The rating reflects the system’s large primary care physician network, long-term collaborations with regional hospitals and leading market position as its market’s only dedicated pediatric provider, Moody’s said. 

Children’s Hospital of Orange County has an “AA-” rating and a stable outlook with Fitch. The rating reflects the Orange, Calif.-based system’s position as the leading provider for pediatric acute care services in Orange County, a position solidified through its adult hospital and regional partnerships, ambulatory presence and pediatric trauma status, Fitch said. 

Children’s Minnesota has an “AA” rating and stable outlook with Fitch. The rating reflects the Minneapolis-based system’s strong balance sheet, robust liquidity position and dominant pediatric market position, Fitch said. 

Cincinnati Children’s Hospital Medical Center has an “Aa2” rating and stable outlook with Moody’s. The rating is supported by its national and international reputation in clinical services and research, Moody’s said. 

Cook Children’s Medical Center has an “Aa2” rating and stable outlook with Moody’s. The ratings agency said the Fort Worth Texas-based system will benefit from revenue diversification through its sizable health plan, large physician group, and an expanding North Texas footprint.   

El Camino Health has an “AA” rating and a stable outlook with Fitch. The rating reflects the Mountain View, Calif.-based system’s strong operating profile assessment with a history of generating double-digit operating EBITDA margins anchored by a service area that features strong demographics as well as a healthy payer mix, Fitch said. 

Hoag Memorial Hospital Presbyterian has an “AA” rating and stable outlook with Fitch. The Newport Beach, Calif.-based system’s rating is supported by its strong operating risk assessment, leading market position in its immediate service area and strong financial profile,” Fitch said. 

Inspira Health has an “AA-” rating and stable outlook with Fitch. The rating reflects Fitch’s expectation that the Mullica Hill, N.J.-based system will return to strong operating cash flows following the operating challenges of 2022 and 2023, as well as the successful integration of Inspira Medical Center of Mannington (formerly Salem Medical Center). 

JPS Health Network has an “AA” rating and stable outlook with Fitch. The rating reflects the Fort Worth, Texas-based system’s sound historical and forecast operating margins, the ratings agency said. 

Mass General Brigham has an “Aa3” rating and stable outlook with Moody’s. The rating reflects the Somerville, Mass.-based system’s strong reputation for clinical services and research at its namesake academic medical center flagships that drive excellent patient demand and help it maintain a strong market position, Moody’s said. 

McLaren Health Care has an “AA-” rating and stable outlook with Fitch. The rating reflects the Grand Blanc, Mich.-based system’s leading market position over a broad service area covering much of Michigan, the ratings agency said. 

Med Center Health has an “AA-” rating and stable outlook with Fitch. The rating reflects the Bowling Green, Ky.-based system’s strong operating risk assessment and leading market position in a primary service area with favorable population growth, Fitch said.  

Nicklaus Children’s Hospital has an “AA-” rating and stable outlook with Fitch. The rating is supported by the Miami-based system’s position as the “premier pediatric hospital in South Florida with a leading and growing market share,” Fitch said. 

Novant Health has an “AA-” rating and stable outlook with Fitch. The ratings agency said the Winston-Salem, N.C.-based system’s recent acquisition of three South Carolina hospitals from Dallas-based Tenet Healthcare will be accretive to its operating performance as the hospitals are highly profited and located in areas with growing populations and good income levels. 

Oregon Health & Science University has an “Aa3” rating and stable outlook with Moody’s. The rating reflects the Portland-based system’s top-class academic, research and clinical capabilities, Moody’s said.  

Orlando (Fla.) Health has an “AA-” rating and stable outlook with Fitch. The rating reflects the health system’s strong and consistent operating performance and a growing presence in a demographically favorable market, Fitch said.  

Presbyterian Healthcare Services has an “AA” rating and stable outlook with Fitch. The Albuquerque, N.M.-based system’s rating is driven by a strong financial profile combined with a leading market position with broad coverage in both acute care services and health plan operations, Fitch said. 

Rush University System for Health has an “AA-” rating and stable outlook with Fitch. The rating reflects the Chicago-based system’s strong financial profile and an expectation that operating margins will rebound despite ongoing macro labor pressures, the rating agency said. 

Saint Francis Healthcare System has an “AA” rating and stable outlook with Fitch. The rating reflects the Cape Girardeau, Mo.-based system’s strong financial profile, characterized by robust liquidity metrics, Fitch said. 

Saint Luke’s Health System has an “Aa2” rating and stable outlook with Moody’s. The Kansas City, Mo.-based system’s rating was upgraded from “A1” after its merger with St. Louis-based BJC HealthCare was completed in January. 

Salem (Ore.) Health has an”AA-” rating and stable outlook with Fitch. The rating reflects the system’s dominant marketing positive in a stable service area with good population growth and demand for acute care services, Fitch said. 

Seattle Children’s Hospital has an “AA” rating and a stable outlook with Fitch. The rating reflects the system’s strong market position as the only children’s hospital in Seattle and provider of pediatric care to an area that covers four states, Fitch said.  

SSM Health has an “AA-” rating and stable outlook with Fitch. The St. Louis-based system’s rating is supported by a strong financial profile, multistate presence and scale with good revenue diversity, Fitch said. 

St. Elizabeth Medical Center has an “AA” rating and stable outlook with Fitch. The rating reflects the Edgewood, Ky.-based system’s strong liquidity, leading market position and strong financial management, Fitch said. 

Stanford Health Care has an “Aa3” rating and positive outlook with Moody’s. The rating reflects the Palo Alto, Calif.-based system’s clinical prominence, patient demand and its location in an affluent and well insured market, Moody’s said.     

University of Colorado Health has an “AA” rating and stable outlook with Fitch. The Aurora-based system’s rating reflects a strong financial profile benefiting from a track record of robust operating margins and the system’s growing share of a growth market anchored by its position as the only academic medical center in the state, Fitch said. 

Willis-Knighton Medical Center has an “AA-” rating and positive outlook with Fitch. The outlook reflects the Shreveport, La.-based system’s improving operating performance relative to the past two fiscal years combined with Fitch’s expectation for continued improvement in 2024 and beyond. 

Steward’s bankruptcy documents reveal sprawling debt, planned hospital fire sale

Posted on by • Posted in Bankruptcy, Chapter 11, Financial Distress, Financial Instability, Financial Stewardship, Financial Strength, Financial Transparency, Financial Viability, Financially Distressed, Health System, Restructure • Leave a comment
https://www.healthcaredive.com/news/stewards-bankruptcy-documents-reveal-sprawling-debt-planned-hospital-fire/715245/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202024-05-07%20Healthcare%20Dive%20%5Bissue:61826%5D&utm_term=Healthcare%20Dive

Since filing for bankruptcy Monday, Steward Health Care revealed it’s carrying more than $1 billion in debt and said its entire hospital portfolio is for sale.

At 3:30 a.m. Monday, Steward Health Care filed for Chapter 11 protections in U.S. Bankruptcy Court for the Southern District of Texas.

Eleven minutes later, Steward employees had an email waiting from their CEO, Ralph de la Torre. The CEO told his staff that industrywide economic headwinds and delays in Steward’s planned asset sales had forced the physician-owned health network to initiate restructuring proceedings.

“It is incumbent on all of us to ensure that this process has no impact on the quality care our patients, their families, and our communities can continue to receive at our hospitals,” de la Torre wrote in an email viewed by Healthcare Dive. “To the vast majority of you, operations will either not be different or improve.”

“To be clear, this is a restructuring under chapter 11; it is not a closure and it is not a liquidation,” he wrote.

The email was the first time employees had heard directly from Steward leadership about the company’s financial distress — though rumors and uncertainty about the operator had been festering for weeks, according to Marlishia Aho, regional communications director for the union 1199SEIU United Healthcare Workers East.

Leading up to Monday’s filing, state and federal lawmakers were increasingly worried about how a bankruptcy at the largest physician-led hospital operator in the country would impact access to care. 

Regulators in Massachusetts — where Steward operates eight hospitals — held closed-door strategy sessions to map out contingency in case of a bankruptcy, and workers staged rallies to protest possible hospital closures.

Steward provides care for more than 2 million patients each year across 31 hospitals and 400 facility locations, according to bankruptcy filings. The company also employs nearly 30,000 employees across its eight-state portfolio, including 4,500 primary and specialty care physicians. 

Steward’s first-day bankruptcy motions shed light on the operator’s future — and outlines its strategy for paying down its massive debt by selling assets. Here are the biggest takeaways.

Steward’s sprawling debt

Steward has earned a reputation for being cagey about its finances — to the dismay of Massachusetts Gov. Maura Healey, who accused the company of operating in a “black box” in a letter to its CEO earlier this year.

The operator has refused to file routine finances with Massachusetts regulators for years, citing a need to protect confidential business data. Even as the company shuttered hospitals this winter, regulators said Steward still dragged its feet on providing financial data, frustrating policymakers’ efforts to build out contingency plans.

“One of the good things about bankruptcy is that Steward and its CEO … will no longer be able to lie,” said Healey during a press conference Monday morning. “Transparency is really important here, and that’s why you know we’re looking forward to seeing what is in the various documents … We need clarity about debts and liabilities.”

In a slew of first-day motions, Steward now revealed it owes around $1.2 billion in total loan debts and about $6.6 billion in long-term lease payments.

Steward owes north of $600 million to 30 of its largest lenders, which include UnitedHealth-owned Change Healthcare, Philips North America LLC, Medline Industries, AYA Healthcare and Cerner.

The healthcare operator owes $289.8 million in unpaid compensation obligations, including $68 million to its own workers in unpaid employee salaries, $105.6 million in payments for physician services and $47.7 million owed to staffing agencies.

It also has approximately $979.4 million outstanding in trade obligations, of which approximately 70% are over 120 days past due.

The filings follow lawsuits from a multitude vendors — including staffing firms, consultants, medical equipment companies, electricians and marketing research companies — who said Steward reneged on payment obligations.

Steward’s interim funding tied to hospital sales

Though Steward had a consortium of six private lenders financing its asset-based loans this year, now only one lender is listed in bankruptcy filings as funding its debtor-in-possession financing: its landlord, Medical Properties Trust.

The change in vendors is notable, according to Laura Coordes, professor of law at the Sandra Day O’Connor College of Law at Arizona State University.

“Something went on to get these other lenders to drop out,” she said.

The landlord may be opting to fund Steward during bankruptcy proceedings in hopes of getting its own money back more expediently, according to Coordes.

Steward is MPT’s largest tenant and the healthcare network will owe MPT at least $6.9 billion in debt and lease obligations by 2041, according to the filings.

MPT agreed to finance $75 million debtor-in-possession financing and could fund up to $225 million more if Steward completes asset sale milestones on time.

During Tuesday morning’s first day hearing a representative for Steward told Judge Chris Lopez that all of Steward’s 31 hospitals are for sale. But to receive the $225 million from MPT, Steward has to hit aggressive sales milestones. It must host an auction for all non-Florida hospitals by June 28 and all Florida properties by July 30.

Since February, MPT executives have said there is strong interest from buyers in taking over Steward leases. However, Steward has yet to sell a hospital.

Experts have told Healthcare Dive they’re skeptical other operators would take on Steward’s leases at MPT’s current rental rates.

“Given the unaffordability of the leases and given that it hasn’t worked in the past, I do think that really material rent concessions are going to be needed to get this done,” said Rob Simone, sector head of real estate investment trusts at analyst firm Hedgeye.

Steward also signed a letter of intent to sell its physician group, Stewardship Health, to UnitedHealth. Although the deal was first announced in March, regulators have not yet begun reviewing the deal, according to David Seltz, executive director of the Massachusetts Health Policy Commission. Seltz said missing paperwork is delaying the review.

The Stewardship deal is not tied to further funding. A representative from UnitedHealth declined to comment on the pending deal and whether the bankruptcy proceeding would impact the sale.

Future of Steward

Employees have received conflicting messages about the future of Steward hospitals.

On one hand, both de la Torre and Massachusetts officials said Monday that Steward hospitals would remain open this week. However, Healey also emphasized that she wants Steward out of the state.

“Ultimately, [bankruptcy] is a step toward our goal of getting Steward out of Massachusetts,” Healey said during a press conference Monday.

Some Steward facilities may wind down during the bankruptcy proceedings, said Massachusetts Attorney General Andrea Campbell. Her office will oversee that process closely, and Steward will be required to provide licensing and notice obligations.

A healthcare worker at Steward’s Nashoba Valley Hospital told Healthcare Dive Monday she’s particularly concerned about the fate of her facility, which she says serves 14 communities but is small compared to some other hospitals in Steward’s portfolio. She doesn’t want regulators to forget about Nashoba.

“What I’m hoping for is that our state representatives and our local representatives really push to keep the hospital open,” she said. “But my concern is we get overlooked.”

State officials said they would continue monitoring Steward facilities to ensure quality care and push for the appointment of a patient care ombudsman to represent the interests of patients and employees during bankruptcy proceedings. Officials have already launched a website to offer resources about the bankruptcy process.

Still, employees are unsure of the path forward.

The Nashoba Valley Hospital employee told Healthcare Dive they’re conflicted about whether to stay at the hospital they’ve worked at for years or try to find a new position while they can.

“I’ve used the hospital since I moved out here. I’ve been living out in this area for like 25 years … I’ve brought my mother to this hospital,” the worker said. “It’s my hospital. It’s not just where I work. It’s what I use, and it’s vitally important to the community.”

HHS finalizes revised dispute resolution process for 340B program

Posted on by • Posted in Dept of Health and Human Services (HHS), Dispute Resolution, Health System, Hospital, Hospital Industry, Lawsuit, Medicare 340B Drug Discount Program, Pharmaceutical Industry • Leave a comment

https://www.kaufmanhall.com/insights/blog/gist-weekly-april-26-2024

Late last week, the Department of Health and Human Services (HHS) published a final rule establishing a new administrative dispute resolution process for the 340B drug discount program.

A panel, composed of government experts from the Office of Pharmacy Affairs, will resolve claims raised by covered entity providers about drugmakers overcharging them for 340B drugs, as well as claims from pharmaceutical companies that covered entities are diverting or duplicating discounts improperly. The new process, which will go into effect in mid-June, allows the panel to review claims on issues related to those pending in federal court. It’s intended to be “more accessible, administratively feasible, and timely” than a prior process established by HHS in 2020 that was paused after legal challenges.

The Gist: 

This new 340B dispute resolution process is likely to see extensive use, as battles between providers and drugmakers over the drug discount program have heated up significantly in recent years. There are more than 50 ongoing court cases related to the program, many of which concern actions taken by at least 20 major drugmakers to restrict 340B sales to contract pharmacies. Although this new process may provide more effective dispute resolution, none of its decisions can be considered final until courts have settled the myriad cases before them.