14 health systems with strong finances

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Here are 14 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. Advocate Aurora Health has an “Aa3” rating and positive outlook with Moody’s. The health system, which has dual headquarters in Milwaukee and Downers Grove, Ill., has a leading market share in two regions and strong financial discipline, Moody’s said. The credit rating agency said it expects Advocate Aurora Health’s operating cash flow margins to return to pre-pandemic levels. 

2. Pinehurst, N.C.-based FirstHealth of the Carolinas has an “AA” rating and stable outlook with Fitch. The health system has a strong financial profile and stable operating performance, despite disruption from the COVID-19 pandemic, Fitch said. The health system’s revenue in the first quarter of fiscal 2021 rebounded to levels close to historical trends, according to the credit rating agency. 

3. Indianapolis-based Indiana University Health has an “Aa2” rating and stable outlook with Moody’s and an “AA” rating and positive outlook with Fitch. Cost controls and patient volume will help the system sustain strong margins and liquidity, Moody’s said. 

4. Rapid City, S.D.-based Monument Health has an “AA-” rating and stable outlook with Fitch. The health system has solid operating margins that Fitch expects to remain stable over the near term. Monument Health’s operating margins will continue to support liquidity growth and capital spending levels, the credit rating agency said. 

5. Chicago-based Northwestern Medicine has an “Aa2” rating and stable outlook with Moody’s, and an “AA+” rating and stable outlook with S&P. The system’s consolidated operating model will allow it to maintain a strong financial position while effectively executing strategies, Moody’s said. The credit rating agency expects Northwestern Medicine to expand its prominent market position in the broader Chicago region because of its strong brand and affiliation with Northwestern University’s Feinberg School of Medicine. 

6. Renton, Wash.-based Providence has an “AA-” rating and stable outlook with Fitch and an “Aa3” rating and stable outlook with Moody’s. Fitch said Providence has a long-term strategic advantage over most of its peers because it has invested heavily in developing technology in recent years, and the system’s plan to transform healthcare delivery through the use of data and technology has been undeterred through the COVID-19 pandemic. Fitch said it expects Providence’s cash flow margins to be close to 7 percent in the coming years. 

7. Livingston, N.J.-based RWJBarnabas Health has an “Aa3” rating and stable outlook with Moody’s. Moody’s said it expects RWJBarnabas, the largest integrated academic health system in New Jersey, to see near-term revenue growth and to execute on several strategic fronts while achieving targeted financial performance.  

8. 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 health system has consistently improved its liquidity levels and has a long track record of exceptional operations, Fitch said. SCL Health is well positioned for change in the healthcare sector because it has built up cash reserves over time, according to the credit rating agency. 

9. San Diego-based Scripps Health has an “Aa3” rating and stable outlook with Moody’s. The health system has ample liquidity coverage, an extensive footprint and strong brand and market share within San Diego County, Moody’s said. The credit rating agency said it expects Scripps to weather current operating challenges and to grow operating cash flow over the long term. 

10. Norfolk, Va.-based Sentara Healthcare has an “Aa2” rating and stable outlook with Moody’s. The health system has strong margins, and Moody’s said it expects the system to maintain a strong financial position and balance sheet. 

11. Arlington-based Texas Health Resources has an “Aa2” rating and stable outlook with Moody’s. The health system has a strong cash position, which will be boosted by favorable investment gains and bond proceeds, Moody’s said. Based on performance in the second quarter of this year, Moody’s expects Texas Health Resources’ patient volume and operating cash flow margins to recover to pre-COVID-19 levels. 

12. Iowa City-based University of Iowa Hospitals & Clinics has an “Aa2” rating and stable outlook with Moody’s. The credit rating agency said it expects the system to maintain strong operating performance and cash flow. The system benefits as the only academic medical center in Iowa, according to Moody’s. 

13. Des Moines, Iowa-based UnityPoint Health has an “AA-” rating and stable outlook with Fitch. The system has strong leverage metrics, and it benefited from strong market returns during the pandemic. The system’s days with cash on-hand increased to 285 days at the end of 2020, up from 231 days at the end of 2019, according to the credit rating agency. 

14. Kansas City-based University of Kansas Health System has an “AA-” rating and stable outlook with Fitch. The health system has solid operating results and has sustained significant revenue growth, Fitch said. The system’s profitability dipped in fiscal year 2020 because of the COVID-19 pandemic, but its profitability rebounded in fiscal year 2021, according to the credit rating agency. 

S&P upgrades view on nonprofit health sector as COVID-19 cases drop

Dive Brief:

  • S&P Global Ratings on Wednesday upgraded its view on the nonprofit healthcare sector to stable. It had been at negative since March 2020, a view that was affirmed in January.
  • Analysts said the change results from coronavirus vaccination rates and decreasing COVID-19 cases as well as a drop in the unemployment rate that should reduce payer mix shakeup. They also pointed to generally healthy balance sheets across the sector.
  • Headwinds remain, most notably labor expenses as burnout among staff was heavily exacerbated by the pandemic. Increased salaries and benefit expenses will dampen margins going forward, according to the report.

Dive Insight:

The change is another sign for providers that their financial situation is on a rather swift recovery from the upheaval caused by the pandemic. Although some facilities, especially those that are smaller and in rural areas, are certainly still struggling, that was the case before COVID-19 as well.

Most nonprofit health systems reported first-quarter results that showed improved volumes and investment returns. Some are still sporting more than a year’s worth of cash on hand.

Many of them took advantage of federal coronavirus relief funds, most of which can now be used more flexibly. A few, like Kaiser Permanente, did fine without the aid and ended up returning it.

The S&P analysts warned, however, that potential COVID-19 outbreaks this fall would be a setback. That remains a concern with some parts of the country lagging in vaccination rates and the increasing prevalence of more contagious COVID-19 variants.

Other risks include the end of enhanced federal reimbursement and the return of the Medicare sequester cuts when the public health emergency ends, which is expected to be after the end of this year.

But the analysts said agile management teams should be able to combat these challenges.

“[T]o the extent that the pandemic has enabled faster decision making and allowed management teams to pivot and identify new opportunities for expense base restructuring and revenue enhancement, we believe these risks are manageable within our view of the stable sector view,” according to the report.

Non-operating income helps Providence claw back into black for 2020

https://www.healthcaredive.com/news/non-operating-income-helps-providence-claw-back-into-black-for-2020/596370/

Dive Brief:

  • Though the COVID-19 pandemic hampered Providence’s operational performance in 2020, the regional nonprofit powerhouse still ended the year in the black with net income of $1 billion, down about 9% from 2019.
  • Providence ended 2020 with an operating loss of $306 million, compared to an operating income of $214 million in 2019. However, healthy non-operating income recouped operating losses and offset reimbursement shortfalls from Medicaid and Medicare coverage, Providence said in full-year financial results released Monday.
  • The system, which operates 51 hospitals spanning seven states, posted drastic net losses in the first half of 2020 due to the pandemic, but seems to have closed out the year on more stable financial footing though volumes remain down.

Dive Insight:

Like other major systems, the pandemic railroaded Providence’s operational performance in 2020, as state and local lockdowns and orders to pause non-emergency procedures contributed to an unprecedented drop in patient volumes starting in March. As a result, the West Coast system reported a significant dip in patient revenue, along with skyrocketing expenses for personal protective equipment, pharmaceuticals and labor.

Volumes as measured by adjusted admissions were down 9% for the fiscal year ended Dec. 31, Providence said. Despite the lower volume, operating revenues were actually up 3% year over year to $25.7 billion, driven by growth in capitation, premium and diversified revenue streams — and supported by the recognition of $957 million in federal COVID-19 grants to providers from the Coronavirus Aid, Relief, and Economic Security Act passed a year ago.

However, operating expenses climbed 5% year over year to $26 billion, resulting in ​operating earnings before interest, depreciation and amortization of $1.1 billion, compared with $1.6 billion in 2019.

Overall, Providence’s financial results suggest the system was able to sidestep the worst of the pandemic’s financial effects, and mirrors 2020 reports from other major nonprofits.

Kaiser Permanente, which reported in early February, was also able to stay in the black despite COVID-19 deflating operating and net income, which fell about 19% and 15% respectively from 2019. Similarly, nonprofit Mayo Clinic reported a shrinking bottom line, with net income down almost 24% from 2019 though it remained profitable.

California-based nonprofit Sutter Health also squeaked to overall profitability in 2020 despite a operational loss of $321 million. The system, which said it expected to take several years to fully recover from COVID-19, launched a systemwide operational and financial review as a result of its weak operational performance.

For-profit operators weathered similar headwinds and were able to turn a profit in 2020, including Universal Health ServicesHCA HealthcareTenet and Community Health Systems.

A number of hospital executives have called out CARES grants and other federal aid as a key help in turning their finances around in 2020. However, despite the pandemic’s financial pressures, numerous major operators, including Kaiser Permanante, Mayo Clinic and HCA said they would return all or a portion of congressional aid, even as powerful hospital lobbies call on Washington for additional funds.

A recent Kaufman Hall report suggests providers could be overwhelmed by ongoing COVID-19 expenses following a surge in cases over the winter. Researchers estimate hospitals could lose anywhere from $53 billion to $122 billion in revenue in 2021 if pandemic pressures don’t abate, despite the glimmer of hope brought by ongoing vaccination efforts.

Despite increasing distribution of coronavirus vaccines, Moody’s Investors Service has placed a negative outlook on nonprofit hospitals in 2021.

Providence came together in 2016 with the merger of Washington-based Providence Health & Services and California-based St. Joseph Health to create the nation’s fourth-biggest Catholic hospital chain. Its full-year earnings come a week after California Attorney General and Biden nominee for HHS Secretary Xavier Becerra disclosed his office is investigating whether Providence violated legal commitments in applying religious restrictions to medical care at a hospital in Orange County.​

Sutter launches ‘sweeping review’ of finances after $321M operating loss

https://www.healthcaredive.com/news/sutter-launches-sweeping-review-of-finances-after-321m-operating-loss/596221/

Digital assistant uses AI to ease medical documentation at Sutter | Health  Data Management

Dive Brief:

  • Sutter Health is launching a “sweeping review” of its finances and operations due to the pandemic’s squeeze on the system in 2020, which led to a $321 million operational loss, the system said Thursday. 
  • The giant hospital provider in Northern California said it will take “several years to fully recover,” adding that it plans to restructure and even close some programs and services that attract fewer patients, and will reassign those employees to busier parts of its network. 
  • Sutter, which spent $431 million to modernize its facilities last year, is also reassessing its future capital investments due to its current financial situation. 

Dive Insight:

The pandemic “exacerbated” existing challenges for the provider, including labor costs, Sutter said. 

Expenses again outpaced revenue in 2020 and Sutter fears the trajectory is “unsustainable.” 

In 2020, Sutter generated revenue of $13.2 billion which was eclipsed by $13.5 billion in expenses, which was actually lower than its total expenses reported in 2019. 

Last year, the system invested heavily to prepare for the pandemic, buying up personal protective equipment and other supplies all while volumes declined. Sutter estimates it spent at least $121 million on COVID-19 supplies, which does not include outside staffing costs. 

Sutter said labor costs represented 60% of its total operating expenses, blaming high hospital wage indexes in Northern California, which it said are among the priciest in the country.

Still, Sutter was able to post net income of $134 million thanks in part to investment income, which was also deflated compared to the year prior. 

Volume has not rebounded to pre-pandemic levels, the system said. 

Admissions, emergency room visits and outpatient revenues all fell year over year, according to figures in Sutter’s audited financial statements. 

Other major health systems were pinched by the pandemic but were able to post a profit, including Kaiser Permanente.  

How hospital operators fared financially in 2020

“For the most part providers were dependent on that CARES funding. I think they would have been in the red or break even without it,” Suzie Desai, a senior director at S&P Global Ratings, said.

The pandemic weighed heavily on the financial performance of not-for-profit hospitals in 2020, but some of the larger health systems remained profitable despite the upheaval — in large part thanks to substantial federal funding earmarked to prop up providers during the global health crisis. 

Industry observers have been closely watching to see how health systems ultimately fared in 2020. Now, with the fiscal-year ended and accounted for, analysts say the $175 billion in federal funds was crucial for providers’ bottom lines.

Without the stimulus funding, it is very likely we would have seen more issuers [hospitals/health] systems experience either lower profitable margins, or outright losses from operations,” Kevin Holloran, senior director of U.S. public finance for Fitch Ratings, said.  

Still, the pandemic put a squeeze on nonprofit hospital margins last year, according to a recent Moody’s report that showed the median operating margin was 0.5% in 2020 compared to 2.4% in 2019.

The first half of the year hit providers especially hard as volumes fell drastically, seemingly overnight. Revenue plummeted alongside the volume declines as the nation paused lucrative elective procedures to preserve medical resources.

One estimate showed hospitals lost more than $20 billion as they halted surgeries in the early months of the outbreak in the U.S. 

But as the year wore on, the outlook improved as some volumes returned closer to pre-pandemic levels. At the same time, health systems worked to cut expenses to mitigate the financial strain.

Still, some health systems did post operational losses even with the federal funds meant to help them. Moody’s found that 42% of 130 hospitals surveyed posted an operating loss, an increase from 23% the year prior. Yet, the 2019 survey included more hospitals, a total of 282.

Sutter Health, the Northern California giant, reported an operating loss for 2020 and said it was launching a “sweeping review” of its finances as the pandemic exacerbated existing challenges for the provider. Washington-based Providence also reported an operating loss for 2020. However, both Sutter and Providence were able to post positive net income thanks in large part to investment gains.    

Investment income can aid nonprofit operators even when core operations are stunted like during 2020. Though, initially, the pandemic put stress on the stock market as uncertainty around the virus and its duration ballooned. The stock market took a dive and it was reflected in some six-month financials as both operations and investments took a hit. 

“COVID and the stimulus is (hopefully) a once in a lifetime disruption of operations,” Holloran said, who noted analysts have been trying to assess whether the top line losses can be placed squarely on COVID-19. If that’s the case, analysts are typically more apt to keep the provider’s existing rating. 

“For the most part providers were dependent on that CARES funding. I think they would have been in the red or break even without it,” Suzie Desai, a senior director at S&P Global Ratings, said.

For example, Arizona’s Banner Health would have posted an operating loss without federal relief, according to their financial reports. Banner Health was able to work its way back to black after it reported a loss through the first six months of the year. The same was true for Midwest behemoth Advocate Aurora. 

The providers that were able to weather the storm of the pandemic tended to be integrated systems that had a health plan under their umbrella. 

Kaiser Permanente ended the year with both positive operating and net income and returned relief funds it received.   

“The integrated providers, yeah, were one group that just had a natural hedge with the insurance premiums still coming in,” Desai said.  

Still, the hospital lobby is hoping to secure more funding for its members as the threat of the virus is still present even amid large scale efforts to vaccinate a majority of Americans to reach a blanket of protection from the novel coronavirus and its variants.

Citrus Health denies it’s violating compensation law; state says probe continues

https://www.miamiherald.com/news/politics-government/state-politics/article248806165.html

Mario Jardon, president and CEO of the Hialeah-based Citrus Health Network, made $574,660, which the state says includes $360,840 in excess compensation. The state says the agency also paid excessive compensation to two other executives at the community-based mental health center, for a total of $403,000 in excessive compensation. The company denies it.

The child welfare agency that serves Miami-Dade and Monroe counties pushed back Wednesday against allegations made by the governor’s chief inspector general, denying claims that it used taxpayer funds to pad excessively high salaries of top executives.

In a statement, Citrus Health Network President and CEO Mario Jardon and Citrus Health Network Board of Directors Chair Patricia Croysdale said that the state did not check with them before issuing the preliminary report and Jardon’s salary, and that of chief operating officer Maria Alonso, “do not come from state funds allocated to Citrus as the lead agency, and are provided at no cost to the state.”

Citrus Health Network, a mental health nonprofit, won a half-billion dollar contract in 2019 from the state Department of Children & Families to oversee child welfare cases in Miami-Dade and Monroe. The arrangement is part of the state program that has privatized state services to a patchwork of “lead agencies.”

According to the preliminary findings by the governor’s Chief Inspector General Melinda Miguel, Citrus Health was one of nine agencies that appear to be paying their executives more than the amount allowed by state law.

Florida law prohibits a community-based care lead agency that receives state and federal funding to provide welfare services from paying its executives more than 150% of what the Department of Children and Families secretary makes — a threshold estimated at $213,820.

In response to the Citrus Health comments, Meredith Beatrice, spokesperson for Gov. Ron DeSantis, said that the intent of the report was to highlight agencies that “were either in non-compliance or appeared to have excessive compensation” and will be investigated further.

“Nothing within the document is conclusory or final,’’ she said.

PRELIMINARY FINDINGS

The report says Jardon made $574,660, which the state says includes $360,840 in excess compensation. The state also said Alonso, Jardon’s partner, made $42,379 over the maximum, and the company’s chief information officer, Renan Llanes, made $172 over the limit.

“The Governor’s Office of Inspector General chose to release a preliminary report incorrectly alleging inappropriate use of state funds and excessive executive compensation without first confirming the information in the report directly with Citrus, and without utilizing other publicly available fiscal documents related to our company,’’ the company’s statement said.

The Citrus Health contract began in July 2019, but the state report appears to have used compensation data from tax documents ending in June 2019.

Citrus also pointed to its web site, which has posted a document that shows a 2020-21 budget that includes compensation of $207,711 with “other compensation” of $20,498 for its director. The company said that refers to Esther Jacobo, the director of the Citrus Health Family Care Network, who formerly was the interim secretary at DCF.

A footnote then adds that “CEO and COO are provided at no cost to [Citrus Family Care Network] and DCF.”

“At the beginning of operations as the lead agency, Citrus’ Board of Directors resolved not to burden the budget of the lead agency with the salaries of the CEO and COO of Citrus Health Network,” said Citrus Health Network spokesperson Leslie M. Viega in a statement. “Our CEO and COO’s salaries do not come from any funds allocated to Citrus as the lead agency, regardless of the source, including state-appropriated funds, state-appropriated federal funds, or private funds.”

The company says the salaries are paid through another division, its federally qualified health center which provides behavioral health, primary care, housing for the homeless, and other social services. The Herald/Times asked Citrus Health for a copy of the financial documents that demonstrate this claim but the organization has not provided them.

A NEW CONTRACT

In 2019, Citrus Health won the child welfare contract from a rival non-profit, Our Kids, after a bruising yearlong fight plagued by allegations that the selection process was marred by the appearance of conflicts of interest. The contract gave the company, which had never handled child welfare before, the job of overseeing about 3,000 vulnerable children in the state’s most populous region.

The inspector general’s investigation is the result of an executive order by DeSantis in February 2020 after the Miami Herald reported and a House of Representatives investigation found that the Florida Coalition Against Domestic Violence paid its chief executive officer, Tiffany Carr, more than $7.5 million over three years.

Carr, who is now a party to two lawsuits, including an attempt by the state to claw back the compensation she was awarded, is currently engaged in negotiations with the attorney general’s office over a mediated settlement.

But it was Carr’s ability to use her network of influential legislators and lobbyists, coupled with the lack of oversight by the Department of Children and Families, that provoked legislators and the governor’s investigators to look into how other non-profits are compensating their executives.

Carr persuaded her board of directors, a close-knit group whom she hand-selected, to approve her compensation package that included thousands of hours of paid leave which she converted to cash.. She justified her salary and bonuses by using comparable salaries of similar organizations but she is alleged to have misrepresented the size of her organization to make the comparisons work to her advantage.

Investigators also suspect Carr avoided declaring millions of dollars in deferred compensation on her tax forms by using a loophole in the tax code.

The inspector general’s report does not name executives but a spreadsheet provided to the Herald/Times from the governor’s office indicates the amounts of compensation by title. The Herald/Times used publicly available tax data to identify the individuals under investigation.

The governor’s office said the next phase of the investigation will be to meet with the nine community-based care organizations early next week “to explain the process” before the final report is completed by June 30.

“It is important to note that the entities impacted from this review will have an opportunity in late May to offer a written response to the draft of the final report,’’ Beatrice said. “Their responses will be included as an attachment to the final report presented to the governor.”

Beaumont reports $278M Q1 loss, cites pandemic

https://www.beckershospitalreview.com/finance/beaumont-reports-278m-q1-loss-cites-pandemic.html?utm_medium=email

Beaumont Health to Study Whether Radiation Helps with Alzheimer's ...

Southfield, Mich.-based Beaumont Health reported a net loss of $278.4 million in the first quarter of 2020, a decrease of $407.5 million compared to the same period one year prior. 

The health system said that the loss is largely due to the COVID-19 pandemic, which negatively affected operating and nonoperating income for the three-month period ended March 31.

Beaumont saw its operating revenue fall to $1.07 billion in the first quarter of 2020, compared to operating revenue of $1.15 billion in the same period in 2019.

In addition, the system saw its operating income drop $91.7 million year over year.

Nonoperating losses for the first quarter totaled $224.6 million, compared to a nonoperating gain of $91.6 million in the same period in 2019. 

“The shelter-in-place order and community concerns about the virus have led to significant reductions in emergency center visits, nonessential surgeries and diagnostic services. We believe these reductions will continue well into the second quarter and negatively impact financial performance in a significant way,” Beaumont Health CFO John Kerndl said.

To help improve its financial performance, Beaumont said it will defer all nonessential capital expenditures, fine-tune staffing levels and cut other expenses.

“We will continue to explore and pursue all options and plans that will help our organization survive this crisis and return to a position of strength after COVID-19 is no longer a threat to our community,” Mr. Kerndl said.

 

 

 

 

Philadelphia hospital sells for $50M

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/philadelphia-hospital-sells-for-50m-121619.html?origin=CFOE&utm_source=CFOE&utm_medium=email

Image result for st christopher hospital philadelphia

West Reading, Pa.-based Tower Health and Drexel University completed the $50 million acquisition of St. Christopher’s Hospital for Children in Philadelphia on Dec. 15.

St. Christopher’s was put up for sale after it and Philadelphia-based Hahnemann University Hospital filed for Chapter 11 bankruptcy at the end of June. Hahnemann closed in September, the same month Tower Health and Drexel University entered into a $50 million agreement to acquire St. Christopher’s.

With the sale complete, 188-bed St. Christopher’s will return to nonprofit status.

“We are grateful for the continuing dedication and hard work of the physicians and employees at St. Christopher’s,” Tower Health President and CEO Clint Matthews said in a press release. “We are excited about a bright future for St. Christopher’s as it continues to serve as a center for healthcare, medical education and research, and innovation.”