A slightly less bad year for CHS

https://www.axios.com/newsletters/axios-vitals-35da8519-cdfe-4d19-bd99-7befbe4bbbea.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top

Image result for community health systems

After the stock market closed yesterday, Community Health Systems disclosed it lost $675 million in 2019, still has $13.4 billion of long-term debt and will sell even more hospitals than it already has, Axios’ Bob Herman reports.

The intrigue: The company’s stock was up 12% in after-hours trading.

  • That’s because CHS expects 2020 to be better — but still lose upwards of $150 million.

The bottom line: CHS owns a lot of hospitals in rural and small communities. Putting aside CHS’ specific business flops, it’s become tougher to operate hospitals in areas where the population is stagnating or declining because hospitals still rely on filling their clinics and beds.

 

 

 

7 health systems with strong finances

https://www.beckershospitalreview.com/finance/7-health-systems-with-strong-finances-01072020.html

Here are seven 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. Durham, N.C.-based Duke University Health System has an “Aa2” rating and stable outlook with Moody’s. The three-hospital system benefits from its role as the academic medical center of Duke University’s School of Medicine and is a nationally recognized and leading provider of tertiary and quaternary services, according to Moody’s. The credit rating agency expects the health system to maintain operating cash flow margins in the double-digit range.

2. Edison, N.J.-based Hackensack Meridian Health has an “AA-” rating and stable outlook with S&P and Fitch. The health system has a solid financial profile and a strong presence in a large and demographically favorable market, according to Fitch. S&P expects the health system’s depth of clinical services and operations to contribute to its stable financial performance.

3. Fountain Valley, Calif.-based MemorialCare has an “AA-” rating and stable outlook with Fitch and S&P. The health system has a strong balance sheet and financial profile, according to Fitch. The credit rating agency expects MemorialCare’s cash flow to improve due to its market strategy, which focuses on revenue diversification.

4. Portland-based Oregon Health & Science University has an “Aa3” rating and stable outlook with Moody’s and an “AA-” rating and stable outlook with S&P. OHSU, which is the only academic medical center in Oregon, has favorable operating performance, strong philanthropy and its clinical offerings draw patients from across Oregon and neighboring states, according to Moody’s. The credit rating agency expects OHSU’s revenue to continue to grow.

5. Boston-based Partners HealthCare, which is changing its name to Mass General Brigham, has an “Aa3” rating and stable outlook with Moody’s. The health system has an excellent reputation in clinical care and research, a seasoned management team, large size and diversity of revenue sources across several locations and lines of business, according to Moody’s. The credit rating agency expects Partners to achieve an operating surplus in fiscal 2020.

6. Norfolk, Va.-based Sentara Healthcare has an “Aa2” rating and stable outlook with Moody’s. The health system has a leading market position in its core service area, strong patient demand, and solid margins, according to Moody’s. The credit rating agency expects Sentara’s liquidity and debt metrics to remain at recent levels.

7. Livonia, Mich.-based Trinity Health has an “AA-” rating and stable outlook with Fitch and S&P. The health system has a significant market presence in several states and a strong financial profile, according to Fitch. The credit rating agency expects the health system’s operating margins to continue to improve.

 

NEW COVENANT HEALTH CFO AIMS TO LEAD ORGANIZATION’S FINANCIAL TURNAROUND

https://www.healthleadersmedia.com/finance/new-covenant-health-cfo-aims-lead-organizations-financial-turnaround

Image result for turnaround

 

The Tewksbury, Massachusetts–based health system strives to post its first positive balance sheet in more than five years.

Stephen Forney, MBA, CPA, FACHE, excels in fixing “broken” organizations and he has built a track record of achieving financial turnarounds at seven healthcare facilities, he tells HealthLeaders in a recent interview.

Forney has over three decades of experience as a healthcare executive, with a primary focus on problem-solving. He began his career fixing problems in areas such as information technology and supply chain, an approach and skill he has carried over into financial operations in the C-suite.

“In finance, it wound up being the same thing. Pretty much every organization I’ve gone to has been broken in some way, shape, or form,” Forney says. “I’ve developed a specialty doing turnarounds and this will be my eighth.”

Forney speaks about his new CFO role at the Tewksbury, Massachusetts–based Catholic nonprofit health system Covenant Health, which he joined in mid-September, and how driving revenue and reducing expenses must go hand-in-hand to achieve financial balance.

This transcript has been lightly edited for brevity and clarity.

HealthLeaders: Covenant is coming off its fifth straight year of operating losses. What is contributing to those losses and how do you plan to address those financial challenges?

Forney: The thing is, most turnarounds—to a greater or lesser extent—look a lot alike. With organizations that have [financial] issues, there are obviously always unique aspects to every situation, but virtually every healthcare organization that’s not doing well is because of the same relatively small handful of issues.

[For example,] revenue cycle is probably No. 1. Productivity has not been well attended to; expenses haven’t had a lot of discipline around them in a broad sense. That’s not to say that all decisions are bad, but in a systematic fashion, things haven’t been looked at. Frequently, driving volume and growing the business needs a better focus. 

In the case of Covenant … there has been a plan developed to address all those areas and we are addressing them already, even though we will be posting another operating loss in fiscal [year] 2019. But the trajectory is good and some of the things that we’re now looking at are what I would consider to be phase two–type initiatives. How do we accelerate and move them to the next level?

On October 1, we outsourced our revenue cycle. I’m pleased that we were able to get that accomplished. Obviously, it’s early but, at least anecdotally, initial trends look good.

HL: Where do you fall on the dynamic between focusing on expense control measures or revenue generation?

Forney: I always feel like you need to do both. Expense management and working towards expense strategies is easier, quicker, and more straightforward.

[Revenue growth strategies] take time, take effort, and tend to [have] a much higher degree of uncertainty around the volume projection. Those are necessary and they’re things that we need to invest in because, at some point, you can’t cut any more from your organization, you’ve got to grow the top line. To me, it’s sort of like step one is stabilize your revenue cycle and stabilize your expenses. Then while you’re doing that, work on growth that’s going to take place 12 to 18 months down the road.

HL: Are you optimistic about the federal government’s efforts to move the industry toward value-based care?

Forney: Going back about a decade, I thought the ACE program, which was [the federal government’s] bundled payment program, was a solid step in the right direction. It gave organizations a chance to collaborate in compliant fashion with physicians to bend the cost curve and have beneficiaries participate in the bending of the cost curve as well. I was with one of the pilot health systems that [participated], and it was a remarkable success.

Everybody got to win; CMS, patients, physicians, and systems won by creating value. Yes, I think that the government has a good role to play in [value-based care] because they have such a large group of patients that they’re willing to experiment like that. [The federal government] can come up with potentially novel ways to get people to buy into this.

HL: What is it like to be at the helm of a Catholic nonprofit system and how does it affect your leadership style?

Forney: From a philosophical standpoint, the principle of creating shareholder wealth and good stewardship are not significantly different. You’ve got an end goal in mind, which is, you’re taking care of the patients and a community. In one case, whatever excess is left goes to a private equity fund or shareholders. In the other case, [the excess] stays in your balance sheet and gets reinvested in the community.

HL: Given your three decades of healthcare experience, do you have advice for your fellow provider CFOs, especially some of the younger ones?

Forney: Focus on being that strategic right-hand person to the CEO. In my experience, that has been one of the things that marks a successful CFO from one that isn’t as successful.

CEOs are going to get ideas from everywhere. They’re outward and inward facing. They deal with the doctors and the community, and they’re going to get all sorts of great ideas.

The CFO needs to be that person [who is] grounded and says, ‘Well, what about this?’ That doesn’t mean saying no. The whole idea is how do you make it [sound] like a yes. To me, the CFO role just grounds all the discussions, from working with physicians to working with the community. 

CFOs over the last couple of decades have been operationally oriented. Now they need to start becoming clinically oriented.

There’s a real benefit in being able to sit down and talk with a physician and understand [what] they’re doing. … It winds up becoming a way to help ground the clinicians in the hospital operations because now you’re having a dialogue with them instead of them just saying, ‘You don’t understand. You’re not a clinician.’ That would be something that I would have a young CFO try to stay focused on, even though it’s dramatically outside the comfort zone for people that typically go into accounting.

 

Lehigh Valley Health Network’s net income more than triples to $115M

https://www.beckershospitalreview.com/finance/lehigh-valley-health-network-s-net-income-more-than-triples-to-115m.html

Image result for lehigh valley health network headquarters

Allentown, Pa.-based Lehigh Valley Health Network saw its net income more than triple from $35.1 million in fiscal year 2018 to $115.3 million in fiscal year 2019, according to financial documents released Dec. 4. 

The health system saw its revenue increase year over year to $2.96 billion in the 12 months ended June 30. In the same period in 2018, the system reported revenue of $2.73 billion.

In fiscal year 2019, Lehigh Valley Health reported expenses of $2.86 billion, up from $2.68 billion in 2018.

Expense growth resulted from several factors, including an increase in salaries and wages and supply costs.

Lehigh Valley Health System attributed the net income increase to cutting back on contract workers and overtime and reducing costs on readmissions and contracts, according to The Morning Call. 

 

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

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

Image result for trinity health headquarters

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

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

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

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

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

 

 

Hospitals of All Sizes Experience Profitability Declines in August

https://www.healthleadersmedia.com/finance/hospitals-all-sizes-experience-profitability-declines-august?spMailingID=16366319&spUserID=MTg2ODM1MDE3NTU1S0&spJobID=1740190718&spReportId=MTc0MDE5MDcxOAS2

Both expense and volume performance were mixed for the month, according to Kaufman Hall.

For only the second time this year, hospitals of all sizes experienced monthly profitability declines, primarily due to “softening volumes,” according to a Kaufman Hall report released Tuesday.

In the month of August, both overall hospital operating EBITDA margins and operating margins fell by 9.4% and 11.4% year-over-year, respectively.

Kaufman Hall compared the August stagnation to the challenges hospitals faced in June, specifically referencing the ineffective approaches to adjust expenses when patient volumes sputter.

Delving into geographic differences, Midwest hospitals continue to show more resiliency than other areas, according to the report.

Hospitals in the northeast and Mid-Atlantic regions witnessed the largest declines in August, a 15.8% year-over-year drop in operating EBITDA margin, while the Great Plains posted profitability of 16.7% above budget.

Despite a relatively promising year thus far where hospitals rebounded from market volatility in 2018, provider organizations hit the financial skids in August due to inconsistent volume metrics.

Most volume metrics took a hit, with discharges, adjusted discharges, emergency department visits, and operating room minutes falling by more than 1.2% each.

Meanwhile, adjusted patient days and average length of stay increased by more than 1.6% as well.

Additionally, expense metrics were mixed for most hospitals, as total expenses per adjusted discharge rose 4% year-over-year, while labor expenses for the same metric increased 2.4%.

Purchased service expenses per adjusted discharge rose 6.1% while non-labor expenses and supply expenses for the same metric rose more than 3.5%.

On the non-operating side, the U.S. labor market continued its strong performance in the face of global headwinds and fears about a potential recession in the coming months.

Kaufman Hall described August as “weak month” for investment assets, noting that investment portfolio returns for hospitals declined 0.46%, the first monthly decline since May.

 

 

 

 

 

 

7 health systems with strong finances

https://www.beckershospitalreview.com/finance/7-health-systems-with-strong-finances-090919.html?oly_enc_id=2893H2397267F7G

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

Note: This is not an exhaustive list. Hospital and health system names were compiled from recent credit rating reports and are listed in alphabetical order.

1. St. Louis-based BJC Health System has an “Aa2” rating and stable outlook with Moody’s. The health system has good margins and a favorable market position, according to Moody’s.

2. Hollywood, Fla.-based Memorial Healthcare System has an “Aa3” rating and stable outlook with Moody’s. The health system has a dominant market position in the southern portion of South Broward County and above average balance sheet liquidity, according to Moody’s.

3. Broomfield, Colo.-based SCL Health has an “Aa3” rating and stable outlook with Moody’s and an “AA-” rating and stable outlook with S&P. The health system has strong operating performance and solid balance sheet measures, according to Moody’s. The credit rating agency expects the health system’s cash flow to continue to grow.

4. Seattle Children’s Healthcare System has an “Aa2” rating and stable outlook with Moody’s. The health system has consistently strong operating performance, solid liquidity measures, and a favorable reputation within a broad service area, according to Moody’s.

5 Norfolk, Va.-based Sentara Healthcare has an “Aa2” rating and stable outlook with Moody’s. The health system has a leading market position in its service area, robust balance sheet metrics and solid margins, according to Moody’s.

6. St. Louis-based SSM Health has an “AA-” rating and stable outlook with Fitch. The health system has a strong financial profile and a growing health plan, according to Fitch. The credit rating agency expects SSM to continue to grow unrestricted liquidity and sustain improved operating performance.

7. Arlington-based Texas Health Resources has an “Aa2” rating and stable outlook with Moody’s. The health system has solid financial performance, a leading market position, good coverage of moderate debt levels, and a strong cash position, according to Moody’s.