8 health systems with strong finances


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

1. Minneapolis-based Allina Health has an “AA-” rating and stable outlook with Fitch. The health system has a strong financial profile and is the acute care leader in the broad Twin Cities metro area, Fitch said. The credit rating agency said Allina’s proven ability to rebound quickly from operating challenges supports the stable outlook.

2. Children’s Healthcare of Atlanta has an “Aa2” rating and stable outlook with Moody’s. The system has strong operating margins and is the leading pediatric provider in the Atlanta area, Moody’s said. The credit rating agency expects Children’s Healthcare of Atlanta to continue to generate robust margins and maintain exceptional liquidity while undergoing a new campus expansion project.

3. La Crosse, Wis.-based Gundersen Health System has an “AA-” rating and stable outlook with Fitch. The health system has consistently strong operating performance, strong balance sheet metrics and a low debt burden, Fitch said. The credit rating agency said Gundersen’s rating continues to be supported by its leading market position and expanding operating platform.

4. Houston Methodist has an “AA” rating and stable outlook with S&P. The system, which comprises an academic medical center and six community hospitals, has a strong enterprise profile and a history of excellent margins and cash flow, S&P said. The credit rating agency said Houston Methodist is well positioned to withstand the pressures from COVID-19.

5. Indianapolis-based Indiana University Health has an “AA” rating and stable outlook with Fitch. The health system has a solid balance sheet and strong operating cash flow despite short-term pressure from the COVID-19 pandemic. The credit rating agency expects IU Health’s EBITDA margins will range between 12 percent and 14 percent annually when margins recover from the pandemic.

6. Broomfield, Colo.-based SCL Health has an “AA-” rating and stable outlook with Fitch and an “Aa3” rating and stable outlook with Moody’s. The system has a track record of exceptional operations, consistent improvement in unrestricted liquidity levels and significant financial flexibility, Fitch said. The credit rating agency said SCL Health is well positioned to manage the pressures of COVID-19, having built up cash reserves.

7. San Diego-based Scripps Health has an “AA” rating and stable outlook with Fitch and an “Aa3” rating and stable outlook with Moody’s. The health system has a strong balance sheet, strong operations and has maintained a low leverage position, Fitch said. The credit rating agency expects Scripps will continue generating operating levels that are consistent with historical trends following recovery from the pandemic.

8. San Diego-based Sharp HealthCare has an “Aa3” rating and stable outlook with Moody’s and an “AA” rating and stable outlook with S&P. The health system has a healthy financial profile, an excellent balance sheet, a solid business position and is the leading provider in a competitive service area, S&P said. The credit rating agency said the system’s financial performance has remained stable despite COVID-19 and the recession.



Coronavirus Metric, The Case Fatality, Is Unreliable


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As the number of coronavirus cases started spiking again this month, the White House keyed in on a different number — one that paints a more rosy picture of the pandemic: the case fatality rate.

When asked about rising cases at a recent briefing, press secretary Kayleigh McEnany quickly parried. “We’re seeing the fatality rate in this country come down,” said McEnany. “That is a very good thing.”

The case fatality rate is the result of a simple mathematical calculation: the number of deaths divided by the number of diagnosed coronavirus cases. But it’s also a moving target. Case numbers are rising fast; deaths are a lagging indicator, running several weeks behind.

“Measuring … mortality rates on any given day is not a reliable way of communicating about this pandemic,” said Dr. Tom Inglesby, director of the Johns Hopkins Center for Health Security.

It is possible that innovations in treatment methods and therapeutic drugs have helped improve the survivability of COVID-19. It is also possible that with more young people being infected in this latest round, they are less likely to die. But medical experts warn it is also just too soon to be sure. And, they say, it’s an unreliable and misleading metric.

But that hasn’t stopped President Trump from boasting about the figure.

“Our case fatality rate has continued to decline and is lower than the European Union and almost everywhere else in the world,” Trump said Tuesday at his first White House coronavirus briefing in nearly three months.

In his interview on Fox News Sunday with Chris Wallace, Trump asked his staff to bring him the “death chart.” He said “the death chart is much more important” as Wallace ticked through 75,000 daily cases and 1,000 daily deaths.

Trump had that chart displayed behind him during the briefing. But this isn’t a metric public health experts have been using.

Inglesby says that by a more direct measure (the sheer number of deaths), and even adjusted for population size, the U.S. is not doing well compared to other countries around the world.

“What national leaders have the obligation to tell people is just the direct truth,” Inglesby said. “If we give them a false sense that things are getting better when they’re not, then they’re going to make decisions that increase the risk of transmission. And they’re also going to stop having confidence in the information they’re being given.”

Focusing on the fatality rate also glosses over other serious problems with the coronavirus, says Dr. David Relman, who specializes in immunology and infectious diseases at Stanford. He says about 20% of people get really sick with potential long-term health consequences. Plus, he says, the coronavirus is stressing the medical system. And as long as it is uncontained, the virus is holding the economy back. So, as he sees it, talking about the case fatality rate is counterproductive.

“What you do instead when you pull out one little piece and dangle it in front of people is to confuse and distract and undermine the overall message,” said Relman.

He says people need to take this virus seriously and take precautions, and that is a sacrifice that requires leaders to get the public on board. For Trump, accentuating the positive might have short-term political benefits, but there are longer-term risks.

“I think it was a mistake early on to be dismissive of the seriousness of it and that it was just going to go away,” said Mike DuHaime, a Republican strategist.

DuHaime gives Trump credit for coming out this week and treating the coronavirus more seriously than he has in the past, telling people to wear masks and avoid crowds. But he readily acknowledges that Trump has gone through other brief spurts urging the public to sacrifice to slow the spread of the virus, only to reverse himself, downplay the severity and pressure states to reopen.

“In order for him to succeed here politically, his credibility has to be as strong as possible,” said DuHaime, who now works at the firm Mercury.

Trump’s credibility has taken a major hit through this crisis. According to the latest Pew Poll, only 30% of Americans trust Trump to get the facts right on the virus. And Trump’s approval rating has tanked too, something he is attempting to repair with the resumed daily briefings.

“At the end of the day, he just needs to do a good job. I know that sounds simplistic, but when you’re an incumbent running for reelection, doing a good job is really the most important thing,” said DuHaime. “And to this point people haven’t seen him do a good job on what they think is the greatest challenge of his presidency.”

DuHaime points out that people are checking the numbers every day — the number of new cases in their city and state, the number of hospitalizations and deaths. Those numbers are all readily available and easier to find than the case fatality rate.



Fitch: Nonprofit hospital margins unlikely to recover until COVID-19 vaccine


What Happens When A Nonprofit Hospital Goes 'For-Profit' : Shots ...

Median financial ratios for nonprofit hospitals and health systems improved before the COVID-19 pandemic, which will provide some financial cushion to withstand financial pressures, according to a report from Fitch Ratings. 

The medians for 2019, based on 2018 data, showed the nonprofit hospital and health system sector stabilized after a period of operational softness. The medians for 2020, based on 2019 audited data, are expected to show improvement in operating margins driven by higher revenues, cost reductions and increased cash flow, Fitch said.

“We expect the 2020 medians will represent peak performance levels until the sector is able to recover from the effects of the pandemic on operations,” Fitch said. 

The credit rating agency said the nonprofit healthcare sector is unlikely to stabilize until a COVID-19 vaccine is widely available.

“The sector has shown considerable resiliency over the years, weathering significant events such as the Great Recession and legislative changes to funding,” Fitch said. “However, the coronavirus presents entirely new and fundamental challenges for the sector in the short term in the form of volume and revenue disruption, and over the medium to longer term with expected deterioration of individual provider payor mixes and possible changes in the behavior of healthcare consumers.”





110 hospital benchmarks | 2020


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Hospitals across the nation compete in a number of ways, including on quality of care and price, and many use benchmarking to determine the top priorities for improvement. The continuous benchmarking process allows hospital executives to see how their organizations stack up against regional competitors as well as national leaders.

Becker’s Hospital Review has collected benchmarks related to some of the most important day-to-day areas hospital executives oversee: quality, finance, staffing and utilization.


Key ratios

Source: Moody’s Investors Service, “Not-for-profit and public healthcare – US: Medians” report, September 2019. 

The medians are based on an analysis of audited fiscal 2018 financial statements for 284 freestanding hospitals, single-state health systems and multistate health systems, representing 79 percent of all Moody’s-rated healthcare entities. Children’s hospitals, hospitals for which five years of data are not available and certain specialty hospitals were not eligible for inclusion in the medians.

1. Maintained bed occupancy: 66.6 percent

2. Operating margin: 1.8 percent

3. Excess margin: 4.3 percent

4. Operating cash flow margin: 7.9 percent

5. Return on assets: 3.6 percent

6. Three-year operating revenue CAGR: 5.6 percent

7. Three-year operating expense CAGR: 6.4 percent

8. Cash on hand: 200.9 days

9. Annual operating revenue growth rate: 5.5 percent

10. Annual operating expense growth rate: 5.4 percent

11. Total debt-to-capitalization: 33.7 percent

12. Total debt-to-operating revenue: 33.3 percent

13. Current ratio: 1.9x

14. Cushion ratio: 21.6x

15. Annual debt service coverage: 4.7x

16. Maximum annual debt service coverage: 4.4x

17. Debt-to-cash flow: 3.1x

18. Capital spending ratio: 1.2x

19. Accounts receivable: 45.9 days

20. Average payment period: 61.4 days

21. Average age of plant: 11.7 years

Hospital margins by credit rating group

Source: S&P Global Ratings “U.S. Not-For-Profit Health Care System Median Financial Ratios — 2018 vs. 2017” report, September 2019.

AA+ rating

22. Operating margin: 5.5 percent

23. Operating EBIDA margin: 12 percent

24. Excess margin: 9.2 percent

25. EBIDA margin: 14.8 percent

AA rating

26. Operating margin: 4.4 percent

27. Operating EBIDA margin: 10.1 percent

28. Excess margin: 6.7 percent

29. EBIDA margin: 12.4 percent

AA- rating

30. Operating margin: 3.4 percent

31. Operating EBIDA margin: 9.5 percent

32. Excess margin: 4.0 percent

33. EBIDA margin: 10.4 percent 

A+ rating

34. Operating margin: 1.6 percent

35. Operating EBIDA margin: 7.4 percent

36. Excess margin: 3.3 percent

37. EBIDA margin: 10.1 percent 

A rating

38. Operating margin: 2.1 percent

39. Operating EBIDA margin: 7.6 percent

40. Excess margin: 3.3 percent

41. EBIDA margin: 8.6 percent

 A- rating

42. Operating margin: 1 percent

43. Operating EBIDA margin: 7.8 percent

44. Excess margin: 2.5 percent

45. EBIDA margin: 8.3 percent

Average adjusted expenses per inpatient day

Source: Kaiser State Health Facts, accessed in 2020 and based on 2018 data. 

Adjusted expenses per inpatient day include all operating and nonoperating expenses for registered U.S. community hospitals, defined as public, nonfederal, short-term general and other hospitals. The figures are an estimate of the expenses incurred in a day of inpatient care and have been adjusted higher to reflect an estimate of the volume of outpatient services.

46. Nonprofit hospitals: $2,653

47. For-profit hospitals: $2,093

48. State/local government hospitals: $2,260

Prescription drug spending

Source: NORC at the University of Chicago’s “Recent Trends in Hospital Drug Spending and Manufacturer Shortages” report, January 2019. Figures below are based on 2017 data.

49. Average prescription drug spending per adjusted admission at U.S. community hospitals: $555 

50. Average outpatient prescription drug spending per adjusted admission at U.S. community hospitals: $523

51. Average inpatient prescription drug spending per admission at U.S. community hospitals: $756

52. GPO hospital spending on Activase:  $210 million

53. GPO hospital spending on Remicade: $138 million

54. GPO hospital spending on Humira: $122 million

55. GPO hospital spending on Rituxan: $92 million

56. GPO hospital spending on Neulasta: $92 million

57. GPO hospital spending on Prolia: $85 million

58. GPO hospital spending on Harvoni: $83 million

59. GPO hospital spending on Procrit: $80 million

60: GPO hospital spending on Lexiscan: $64 million

61. GPO hospital spending on Enbrel: $60 million

Quality and process of care 

Source: Hospital Compare, HHS, Complications and Deaths-National Averages, May 2018, and Timely and Effective Care-National Averages, May 2018, the latest available data for these measures.

Hospital-acquired conditions

The following represent the average percentage of patients in the U.S. who experienced the conditions.

62. Collapsed lung due to medical treatment: 0.27 percent

63. A wound that splits open on the abdomen or pelvis after surgery: 0.95 percent

64. Accidental cuts and tears from medical treatment: 1.29 percent

65. Serious blood clots after surgery: 3.85 percent

66. Serious complications: 1 percent

67. Bloodstream infection after surgery: 5.09 percent

68. Postoperative respiratory failure rate: 7.35 percent

69. Pressure sores: 0.52 percent

70. Broken hip from a fall after surgery: 0.11 percent

71. Perioperative hemorrhage or hematoma rate: 2.53 percent

Death rates

72. Death rate for CABG surgery patients: 3.1 percent

73. Death rate for COPD patients: 8.5 percent

74. Death rate for pneumonia patients: 15.6 percent

75. Death rate for stroke patients: 13.8 percent

76. Death rate for heart attack patients: 12.9 percent

77. Death rate for heart failure patients: 11.5 percent

Outpatients with chest pain or possible heart attack

78. Median time to transfer to another facility for acute coronary intervention: 58 minutes

79. Median time before patient received an ECG: 7 minutes

Lower extremity joint replacement patients

80. Rate of complications for hip/knee replacement patients: 2.5 percent

Flu vaccination

81. Healthcare workers who received flu vaccination: 90 percent

Pregnancy and delivery care

82. Mothers whose deliveries were scheduled one to two weeks early when a scheduled delivery was not medically necessary: 2 percent

Emergency department care

83. Average time patient spent in ED after the physician decided to admit as an inpatient but before leaving the ED for the inpatient room: 103 minutes

84. Average time patient spent in the ED before being sent home: 141 minutes

85. Average time patient spent in the ED before being seen by a healthcare professional: 20 minutes

86. Percentage of patients who left the ED before being seen: 2 percent


Source: American Hospital Association “Hospital Statistics” report, 2019 Edition.

Average full-time staff

87. Hospitals with six to 24 beds: 101

88. Hospitals with 25 to 49 beds: 176

89. Hospitals with 50 to 99 beds: 302

90. Hospitals with 100 to 199 beds: 683

91. Hospitals with 200 to 299 beds: 1,264

92. Hospitals with 300 to 399 beds: 1,789

93. Hospitals with 400 to 499 beds: 2,670

94. Hospitals with 500 or more beds: 5,341

Average part-time staff

95. Hospitals with six to 24 beds: 52

96. Hospitals with 25 to 49 beds: 84

97. Hospitals with 50 to 99 beds: 141

98. Hospitals with 100 to 199 beds: 286

99. Hospitals with 200 to 299 beds: 472

100. Hospitals with 300 to 399 beds: 604

101. Hospitals with 400 to 499 beds: 1,009

102. Hospitals with 500 or more beds: 1,468


Source: American Hospital Association “Hospital Statistics” report, 2019 Edition.

Average admissions per year

103. Hospitals with six to 24 beds: 408

104. Hospitals with 25 to 49 beds: 901

105. Hospitals with 50 to 99 beds: 2,097

106. Hospitals with 100 to 199 beds: 5,809

107. Hospitals with 200 to 299 beds: 11,241

108. Hospitals with 300 to 399 beds: 16,635

109. Hospitals with 400 to 499 beds: 20,801

110. Hospitals with 500 or more beds: 34,593


Tenet posts 3rd consecutive quarter of volume growth


Dive Brief:

  • Shares of hospital chain Tenet Healthcare rose more than 3% Tuesday morning after reporting its third quarter results Monday evening showing broad-based volume growth.
  • Comparing hospital-to-hospital performance, Tenet reported a 3.6% increase in admissions and a slight uptick for inpatient surgeries (1.9%) and outpatient visits (1.6%).
  • The Dallas-based company reported a net loss of $232 million for the quarter attributable to the company’s common shareholders, compared to a loss of $9 million a year earlier.

Dive Insight:

Tenet CEO Ronald Rittenmeyer touted the results on Tuesday’s call with investors and said the company is raising its outlook for the year based on the numbers.

“We had a very positive third quarter with performance improvement in each of our operating segments,” Rittenmeyer said in a statement.

It’s the third consecutive quarter of volume growth, executives said Tuesday.

Rittenmeyer attributed positive trends over the past few years to a strong leadership team. “Tenet is in a much different place than it was two years ago,” he said.

Same-hospital patient revenue grew 5.8% and surgical revenue increased 6.9% on a same-facility basis.

Commercial volume trends were also very positive, executives said.

Still, they said the company faced more than $50 million in unanticipated headwinds including closures and costs related to Hurricane Dorian, lower California provider fee revenues and costs related to a nursing strike at 12 facilities.

The company is raising its outlook for adjusted earnings per share for the year. It expects adjusted diluted earnings per share from continuing operations of $2.25 to $2.91 for the year.

The company’s other segments also showed growth.

Conifer, the revenue cycle management unit, reported adjusted EBITDA of $90 million, an 11% increase from the previous year period. Tenet announced earlier this year it will spin off Conifer into an independent publicly traded company by the second quarter of 2021.

USPI, the outpatient surgical business, has a steady pipeline of health systems willing to send patients to the outpatient facilities, executives said during the call. During the third quarter, the company added three health systems and expects to reach a total of seven by end of year.




Federal Reserve announces 2nd consecutive rate cut


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The Federal Reserve cut interest rates by a quarter point on Wednesday, bringing the target range for the benchmark Fed Funds rate to 1.75%–2%.

Why it matters: The Fed’s 2nd consecutive rate cut reflects worries about the U.S. economy. The trade war and slowing growth around the world have made corporate executives more worried than they’ve been in years.

  • The move prompted a near-immediate response from President Trump, who called chair Powell a “terrible communicator.” The president has demanded in a series of tweets that the Fed cut interest rates more aggressively.

The big picture: Speaking at a press conference, Powell again cited the trade war as a key risk to the economic outlook. “Our business contacts around the country have been telling us that uncertainty about trade policy has discouraged them from investing in their businesses,” Powell said.

  • Still, new projections showed a division among Fed officials about whether more rate cuts are warranted this year.
  • Powell did note that if “the economy does turn down, then a more extensive sequence of rate cuts could be appropriate.”

Powell also acknowledged the liquidity shortfall in money markets that has forced the Fed to intervene — something that before this week hadn’t happened since the financial crisis.

  • In response to the drama in the short-term funding markets, Powell suggested that the Fed may increase the size of its balance sheet through “organic growth” earlier than expected.





Hospital profitability up after significant declines in June, Kaufman Hall finds


Hospitals recorded profit improvements in July after posting significant year-over-year decreases in June, according to a report from financial advisory firm Kaufman Hall.

The firm found hospitals’ EBITDA margin rose 77.5 basis points month over month. Hospitals also saw their operating margins climb 105 basis points. Both measures marked the sixth month of improved hospital profitability out of the past seven months.

“While these trends generally are good news for the industry, the improvements do not necessarily mean that hospitals are achieving sufficient margins,” according to Kaufman Hall. “Also, margins of individual hospitals do not necessarily reflect those of overall health systems.”

Kaufman Hall noted that hospitals did see their volumes increase in July compared to June, which saw declines in patient volumes.

Read the full report here