Credit rating downgrades for several hospitals and health systems were tied to cash flow issues in recent months.
The following seven hospital and health system credit rating downgrades occurred since February:
1. Jupiter (Fla.) Medical Center — lowered in June from “BBB+” to “BBB” (Fitch Ratings) “The ‘BBB’ rating reflects JMC’s increased leverage profile with the issuance of $150 million in additional debt to fund various campus expansion and improvement projects,” Fitch said. “While favorable population growth in the service area and demonstrated demand for services in an increasingly competitive market justify the overall strategic plan and project, the additional debt weakens JMC’s financial profile metrics and increases the overall risk profile.”
2. ProMedica (Toledo, Ohio) — lowered in May from “BBB-” to “BB+” (Fitch Ratings) “The long-term ‘BB+’ rating and the assigned outlook to negative on ProMedica Health System’s debt reflects the system’s significant financial challenges as result of continued pressure of the coronavirus pandemic and escalating expenses, with ProMedica reporting a $252 million operating loss that follows several years of weak performance,” Fitch said.
3. Providence (Renton, Wash.) — lowered in April from “Aa3” to to “A1” (Moody’s Investors Service); lowered from “AA-” to “A+” (Fitch Ratings) “The downgrade to ‘A1’ is driven by the disaffiliation with Hoag Hospital, and the expectation that weaker operating, balance sheet, and debt measures will continue for the time being,” Moody’s said.
4. San Gorgonio Memorial Healthcare District (Banning, Calif.) — lowered in May from “Ba1” to “Ba2” (Moody’s Investors Service) “The downgrade to Ba2 reflects the district’s tenuous cash position and weak finances that have contributed to difficulty in securing a bridge loan financing for liquidity needs pending the delayed receipt of approximately $8 million to $9 million in intergovernmental transfers beyond the end of the fiscal year,” Moody’s said.
5. Willis-Knighton Medical Center (Shreveport, La.) — lowered in March from “A1” to “A2” (Moody’s Investors Service) “The downgrade to A2 reflects expectations that Willis-Knighton will continue to face challenges in achieving budgeted operating cash flow margins due to heightened wage pressures and volume softness,” Moody’s said.
6. OU Health (Oklahoma City) — lowered in March from “Baa3” to “Ba2” (Moody’s Investors Service) “The magnitude of the downgrade to Ba2 reflects projected cashflow in fiscal 2022 that will be materially below prior expectations, from an escalation of labor costs, and reliance on a financing to avoid a further decline in already weak liquidity and potential covenant breach,” Moody’s said. “Also, the rating action reflects execution risk given a prolonged period of management turnover with several key positions unfilled or filled with interim leaders, a governance consideration under Moody’s ESG classification.”
7. Catholic Health System (Buffalo, N.Y.) — lowered in February from “Baa2” to “B1” (Moody’s Investors Service) “The downgrade to ‘B1’ anticipates minimal cashflow and a further significant decline in liquidity this year, following material losses in fiscal 2021 from a 40-day labor strike and the disproportionately severe impact of the pandemic, both social risks under Moody’s ESG classification,” the credit rating agency said.
The right to bear arms has existed since we became a nation. So, too, has the risk of violence that extensive gun ownership creates in our society.
Unfortunately, recent mass shooting incidents, fueled by hatred or mental illness, have sparked a great deal of fear and confusion among Americans.
As healthcare leaders, our concern centers on the treatment of those who are victims of senseless gun violence. And not just those who are shot, but the other victims as well.
Healthcare providers must care for all victims — the ones who are traumatized because a loved one has been hurt or lost, the ones who were at the chaotic scene of the violence, or who are haunted by the endless media stories they cannot seem to tune out. The emotional toll of this violence is incomprehensible.
Healthcare facilities attempt to provide refuge from violence and seek to provide healing and hope to all victims of violence.
Unstable individuals with guns and other weapons of harm find their way into our buildings and hallways as well. Earlier this month, a man who blamed his physician for ongoing pain after a recent back surgery shot and killed his surgeon and three other people before fatally shooting himself in a Tulsa, Okla., medical facility. Also this month, a hospital security officer was shot and killed by a prison inmate who was receiving care in a Dayton, Ohio, emergency room.
These incidents are the latest horrifying tragedies in a wave of deadly gun violence occurring across our country, including two heart-breaking mass shootings in Buffalo, N.Y., and Uvalde, Texas. We mention these tragedies not to make a political statement, but to raise awareness of the consequences of this violence on healthcare providers and the public health.
As healthcare workers, healers, and caregivers, we work to fix what is broken and put people back together. We bring solutions. We engage with our hearts to stand together in the fear and vulnerabilities of those who need us so that we can help them through difficult challenges. We look to bring light to dark situations. We seek to be beacons of hope.
The escalation of recent shootings, suicides and other violent behaviors underscores the urgency for a national conversation on what has become a serious public health crisis. We believe health systems have a credible voice and can play a critical role beyond being places to physically and emotionally care for the victims of violence.
It’s easy to allow ourselves to become numb to the frequency of these unconscionable, violent acts. But we owe it to present and future generations not to let that happen. We recognize there are no easy answers to this national problem. After all, we are dealing with abnormal behavior — the decision to seriously harm or kill other people. That this behavior is increasing calls for something to be done to effect positive change.
People across our country and the communities we serve are hurting and vulnerable. Many people are weary from the pandemic that has impacted our hearts and our health. Violence and death, and particularly mass shootings, hit adults hard. Now consider what the prevalence and threat of school shootings have done to an entire generation of children, who are growing up with the fear of being shot and killed in a place they should feel safe.
We all can play a role. Recently, our two organizations decided to do something to reduce gun violence by sponsoring a law enforcement gun buyback program to help get guns off the street. This effort was part of the largest single-day gun buyback in New Jersey state history. It successfully removed over 2,800 guns statewide. Private organizations, companies, and individuals must think of additional creative ways beyond criticizing politicians, to bring about the change we need.
We encourage organizations and communities to come together, to pool their minds and their resources to address gun violence in society as the urgent public health crisis that it is. We must create meaningful public health campaigns around the safe storage and handling of firearms, and sensible and innovative ways to prevent gun violence in schools, healthcare settings and public places. Individuals should educate themselves on the issues surrounding gun violence so they may contribute to the effort to bring about necessary and meaningful change.
And yes, we need to accelerate efforts around our nation’s mental health crisis. We know from the data and what we are all experiencing that the COVID-19 pandemic has exacerbated what was already a growing nationwide mental health crisis.
Violence against any person in any venue is unspeakable. Yet just because it is unspeakable does not mean we should not speak up about it. Let us put our anger, shock and heartbreak into positive change. With the same unstoppable resolution that we seek to cure cancer or slow heart disease, let us advocate, educate and take meaningful action to end gun violence and all senseless violence that is taking such a tragic toll on our nation and our wellbeing.
About Virtua Health Virtua Health is an academic health system committed to helping the people of South Jersey be well, get well, and stay well by providing the complete spectrum of advanced, accessible, and trusted healthcare services. Virtua’s 14,000 colleagues provide tertiary care, including renowned cardiology and transplant programs, complemented by a community-based care portfolio. In addition to five hospitals, two satellite emergency departments, 30 ambulatory surgery centers, and more than 300 other locations, Virtua brings health services directly into communities through Hospital at Home, physical therapy and rehabilitation, mobile screenings, and its paramedic program. Virtua has 2,850 affiliated doctors and other clinicians, and its specialties include orthopedics, advanced surgery, and maternity. Virtua is academically affiliated with Rowan University, leading research, innovation, and immersive education at the Virtua Health College of Medicine & Health Sciences of Rowan University. Virtua is also affiliated with Penn Medicine for cancer and neuroscience, and the Children’s Hospital of Philadelphia for pediatrics. As a not-for-profit, Virtua is committed to the well-being of the community and provides innovative outreach programs that address social challenges affecting health, most notably the “Eat Well” food access initiative, which includes the unparalleled Eat Well Mobile Grocery Store. A Magnet-recognized health system ranked by U.S. News and World Report, Virtua has received many awards for quality, safety, and its outstanding work environment. For more information, visit Virtua.org. To help Virtua make a difference, visit GiveToVirtua.org.
About Cooper University Health Care Cooper University Health Care is a leading academic health system with more 8,500 employees and more than 800 employed physicians. Cooper University Hospital is the only Level 1 Trauma Center in South Jersey and the busiest in the region. Annually, nearly two million patients are served at Cooper’s 635-bed flagship hospital, outpatient surgery center, three urgent care centers, and more than 105 ambulatory offices throughout the community. The Cooper Health Sciences campus is home to Cooper University Hospital, MD Anderson Cancer Center at Cooper, Children’s Regional Hospital at Cooper, and Cooper Medical School of Rowan University. Visit CooperHealth.org to learn more.
RWJBarnabas Health on Tuesday called off its attempt to acquire St. Peter’s Healthcare System in New Brunswick, N.J., days after the Federal Trade Commission sued to block the proposed transaction.
Pandemic pressures and a high debt load are among the factors stalling Franklin, Tenn.-based Community Health Systems’ financial turnaround, Bloomberg Law report June 8.
CHS, an 83-hospital system, is facing many of the same challenges as other health systems across the U.S., including a surge in labor expenses in the first quarter of this year. The higher expenses and a COVID-19 surge that negatively impacted operating revenues dragged down the company’s earnings in the first quarter of this year. CHS ended the first three months of 2022 with a net loss of $1 million.
CHS leaders expect some of the pressures to continue through the second quarter.
“Moving through the second quarter and the remainder of the year, we anticipate contract labor rates to remain elevated, however, we expect our operational momentum to continue, as we anticipate capturing deferred healthcare demand, benefitting from recent strategic investments, and continuing the execution of the company’s margin improvement program,” Tim Hingtgen, CEO of CHS, said in an April 27 earnings release.
The company cut its earnings forecast in April when it released results for the first quarter, and it has seen its bonds and stock slide since March, according to Bloomberg Law.
Shares of CHS closed June 8 at $5.16, down from $5.25 the day before.
The popularity of travel nursing is leaving healthcare facilities and the companies serving them susceptible to misclassification accusations and joint-employer disputes, Bloomberg Law reported June 14.
Providers should read contracts to understand who is liable if a travel nurse sues a healthcare facility and staffing company, according to the report. Even if agreements state that a hospital is not a temporary employee’s employer, courts may decide it’s a joint employer. If they are a joint employer, they may have to pay legal fees if a staffing agency is sued.
If classified as an employer, healthcare facilities may be bound by labor laws that didn’t apply to independent contractors. In California, for example, employers are required to pay part of a worker’s cell phone bill if a phone is needed for the job.
“Given the already serious issues with many of these healthcare workers feeling overwhelmed and underpaid, they’re going to turn these questions not just to the individual hospitals, but potentially also to the companies that are hosting these platforms,” Sonya Rosenberg, a labor and employment partner at Neal Gerber Eisenberg, told Bloomberg Law.
Two lawsuits against hospital mergers announced the same day may look like the FTC under Chair Lina Khan (pictured) is flexing its muscle to restrain deals that raise prices. But those complaints are “more smoke than fire,” Ken Field, a former FTC lawyer and current co-chair of Jones Day’s global health care practice, told STAT’s Tara Bannow.
The real target shouldn’t be the mergers in Utah and New Jersey between hospitals, antitrust experts said, but something called vertical mergers, in which hospitals buy up physician groups. After such deals, doctors spent $73 million more on 10 common imaging and lab tests over four years, a 2021 Health Affairs study found.
An FTC spokesperson didn’t comment on the agency’s strategy with respect to hospital consolidation.
The Centers for Medicare and Medicaid Services (CMS) fined two of Atlanta-based Northside Hospital’s five facilities a total of $1.1M for failing to disclose their prices. Though only six percent of hospitals are fully in compliance with the federal rules that went into effect in January 2021, CMS has only sent 352 warning letters to date, and this week’s fines are the first the agency has issued.
The Gist: While these first fines are notable, it remains an open question whether the financial penalties for not complying with price transparency are stiff enough to motivate hospitals to submit their data. While more substantial than those under the Trump Administration, the current fines remain a rounding error for many hospitals, as they represent less than one percent of net patient revenue on average.
Market dynamics may be more of a factor in compliance than monetary penalties: a recent JAMA study found that hospitals in more competitive, urban markets were more likely to share prices.
A consultant colleague recently recounted a call from a health system looking for support in physician alignment. He mused, “It’s never a good sign when I hear that the medical group reports to the system CFO [chief financial officer].” We agree. It’s not that CFOs are necessarily bad managers of physician networks, or aren’t collaborative with doctors—as you’d expect from any group of leaders, there are CFOs who excel at these capabilities, and ones that don’t.
The reporting relationship reveals less about the individual executive, and more about how the system views its medical group: less as a strategic partner, and more as “an asset to feed the [hospital] mothership.” Or worse, as a high-cost asset that is underperforming, with the CFO brought in as a “fixer”, taking over management of the physician group to “stop the bleed.”
Ideally the medical group would be led by a senior physician leader, often with the title of chief clinical officer or chief physician executive, who has oversight of all of the system’s physician network relationships, and can coordinate work across all these entities, sitting at the highest level of the executive team, reporting to the CEO. Of course, these kinds of physician leaders—with executive presence, management acumen, respected by physician and executive peers—can be difficult to find.
Having a respected physician leader at the helm is even more important in a time of crisis, whether they lead alone or are paired with the CFO or another executive. Systems should have a plan to build the leadership talent needed to guide doctors through the coming clinical, generational, and strategic shifts in practice.
The Biden administration recently signaled that it will extend the federal COVID-19 public health emergency (PHE), which has been in place for nearly two-and-a-half years, beyond its current July 15 expiration date. As shown in the graphic above, a number of key pandemic-era policies would end if the PHE were discontinued. Hospitals, already experiencing financial challenges, would face an immediate 20 percent reduction in Medicare reimbursement for each hospitalized COVID patient.
Combined with the end of funding for treating uninsured COVID patients, and with millions of Americans expected to lose Medicaid coverage when eligibility checks restart, the cost of treating COVID patients will fall more heavily on providers. More treatment costs will also be passed on to patients, as most private insurers no longer waive cost-sharing for COVID care.
On the telemedicine front, Congress has temporarily extended some Medicare telehealth flexibilities (including current payment codes and coverage for non-rural beneficiaries) for five months after the PHE ends, while CMS studies permanent coverage options. But further Congressional action will be required to keep current Medicare telehealth coverage in place, and these decisions will surely influence private insurers’ telehealth reimbursement policies.
Although the Biden administration promises that it will provide sixty days’ notice before terminating the PHE or letting it expire, providers must prepare for the inevitable financial hit when the PHE ends.
Adult inpatient volumes will recover to pre-pandemic numbers but grow only 2 percent over the next decade, a new report from Sg2 forecasts.
At the same time, adult inpatient days are expected to increase 8 percent and tertiary inpatient days are poised to increase 17 percent, fueled by an increase in chronic conditions.
“While case mix varies by hospital, it is likely this combination of increased inpatient volume, patient complexity and length of stay may require healthcare organizations to rethink service line prioritization, service distribution and investment in care at-home initiatives,” Maddie McDowell, MD, senior principal and medical director of quality and strategy for Sg2, said in a June 7 news release for the report.
Five other key takeaways from Sg2’s forecasts:
1. Outpatient volumes are projected to return to pre-pandemic levels in 2022 and then grow 16 percent through 2032, three percentage points above estimated population growth.
2. Surgical volumes are projected to grow 25 percent at ambulatory surgery centers and 18 percent at hospital outpatient departments and physician offices over the next decade.
3. The pandemic-driven decline in emergency department visits is expected to plateau with a decline in demand projected at -2 percent over the next 10 years.
4. Over the next five years, home care is expected to gain traction, with home evaluation and management visits seeing 19 percent growth, home hospice at 13 percent growth and home physical and occupational therapy at 10 percent growth.
5. Telehealth is expected to resume its climb and by 2032 account for 27 percent of all evaluation and management visits.
HENRY KOTULA 