9 health systems with strong finances

https://www.beckershospitalreview.com/finance/9-health-systems-with-strong-finances-120919.html

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

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

1. Advocate Aurora Health, a 27-hospital system with dual headquarters in Downers Grove, Ill., and Milwaukee, has an “Aa3” rating and positive outlook with Moody’s. The health system has a favorable liquidity position, low leverage, and healthy margins, according to Moody’s. The credit rating agency expects the health system to continue to benefit from its position as a market leader within two large service areas.

2. Morristown, N.J.-based Atlantic Health System has an “Aa3” rating and stable outlook with Moody’s. The five-hospital system has healthy liquidity and solid operating margins, according to Moody’s. The credit rating agency expects strong patient volume, low reliance on governmental funding and other factors to continue to support Atlantic Health System’s financial metrics.

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. Albuquerque, N.M.-based Presbyterian Healthcare Services has an “Aa3” rating and stable outlook with Moody’s. The health system has strong revenue growth, good market share for acute care services and a favorable balance sheet. The credit rating agency expects the health system’s insurance plan, which is already a dominant health plan in New Mexico, to continue to grow.

6. Appleton, Wis.-based ThedaCare has an “AA-” rating and stable outlook with Fitch. The health system has solid cash flow and a leading market position in a stable service area, according to Fitch. The credit rating agency expects ThedaCare’s operating performance to continue to improve.

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.

8. Chapel Hill-based University of North Carolina Hospitals has an “Aa3” rating and stable outlook with Moody’s. UNC Hospitals, part of UNC Health Care System, has an excellent market position and strong financial performance, according to Moody’s. The credit rating agency expects UNC Hospitals to continue to grow patient volumes and maintain strong financial performance.

9. Philadelphia-based University of Pennsylvania Health System has an “Aa3” rating and stable outlook with Moody’s. The health system has a strong market position, and substantial investments in facilities will allow the health system to capitalize on its prominent reputation and wide patient draw, according to Moody’s.

 

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

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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

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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.

 

 

WHY HOSPITALS ARE GETTING INTO THE HOUSING BUSINESS

https://www.healthleadersmedia.com/clinical-care/why-hospitals-are-getting-housing-business

Hospitals cannot discharge patients if they have no safe place to go, so patients who are homeless, frail, living alone, or experiencing an unstable housing situation, can occupy hospital beds long after their acute medical problem is resolved.

One patient at Denver Health, the city’s largest safety net hospital, occupied a bed for more than four years—a hospital record of 1,558 days.

Another admitted for a hard-to-treat bacterial infection needed eight weeks of at-home IV antibiotics, but had no home.

A third, with dementia, came to the hospital after being released from the Denver County Jail. His family refused to take him back.

In the first half of this year alone, the hospital treated more than 100 long-term patients. All had a medical issue that led to their initial hospitalization. But none of the patients had a medical reason for remaining in the hospital for most of their stay.

Legally and morally, hospitals cannot discharge patients if they have no safe place to go. So patients who are homeless, frail or live alone, or have unstable housing, can occupy hospital beds for weeks or months—long after their acute medical problem is resolved. For hospitals, it means losing money because a patient lingering in a bed without medical problems doesn’t generate much, if any, income. Meanwhile, acutely ill patients may wait days in the ER to be moved to a floor because a hospital’s beds are full.

“Those people are, for lack of a better term, stranded in our hospital,” said Dr. Sarah Stella, a Denver Health physician.

To address the problem, hospitals from Baltimore to St. Louis to Sacramento, Calif., are exploring ways to help patients find a home. With recent federal policy changes that encourage hospitals to allocate charity dollars for housing, many hospitals realize it’s cheaper to provide a month of housing than to keep patients for a single night.

Hospital executives find the calculus works even if they have to build affordable housing units themselves. It’s why Denver Health is partnering with the Denver Housing Authority to repurpose a mothballed building on the hospital campus into affordable senior housing, including about 15 apartments designated to help homeless patients transition out of the hospital.

“This is an experiment of sorts,” said Peg Burnette, the hospital’s chief financial officer. “We might be able to help better their lives, as well as help the financials of the hospital and help free up capacity for the patients that need to come to see us for acute care.”

SPENDING TO SAVE MONEY

Denver Health once used the shuttered 10-story building for office space but opted to sell it to the housing authority and grant a 99-year lease on the land for a minimal fee.

“It really lowers the construction costs for us,” said Ismael Guerrero, Denver Housing Authority’s executive director. “It was a great opportunity to build additional housing in a location that’s obviously close to the hospital, close to public transit, near the city center.”

Once the renovation is complete in late 2021, the housing group will hire a coordinator to assist tenants with housing-related issues, including helping those in the transitional units find permanent housing. The hospital will provide a case manager to help with their physical and behavioral health needs, preparing them for life on their own. Denver Health expects most patients will be able to move on from the transitional units within 90 days.

The hospital will pay for the housing portion itself. That will still be far cheaper than what the hospital currently spends.

It costs Denver Health $2,700 a night to keep someone in the hospital. Patients who are prime candidates for the transitional units stay on average 73 days, for a total cost to the hospital of nearly $200,000. The hospital estimates it would cost a fraction of that, about $10,000, to house a patient for a year instead.

“The hospital really is like the most expensive form of housing,” Stella said.

GROWING INTEREST

recent report from the Urban Institute found that while most hospital officials are well aware of how poor housing affects a patient’s recovery, they were stymied about how to address the issue.

“It’s on the radar of almost all hospitals,” said Kathryn Reynolds, who co-authored the report. “But it seemed like actually making investments in housing, providing some type of financing or an investment in land or something that has a good amount of value seems to be less widespread.”

The report found housing investment has been more likely among hospitals with their own health plans or other types of arrangements in which they were receiving a fixed amount of money to care for a group of patients. Getting patients into housing could lower their costs and increase their operating margins. Others, particularly religiously affiliated and children’s hospitals, sought housing solutions as part of their charitable mission.

Reynolds said the trend is due in part to the Affordable Care Act, which requires hospitals to perform a community needs assessment to help guide their charitable efforts. That prompted more hospitals to consider the social needs of their patients and pushed housing concerns up the list. Additionally, the Internal Revenue Service clarified in 2015 that hospitals could claim housing investments as charitable spending required under their tax-free status. And provisions included in the 2017 tax cut bill provided significant tax savings for investors in newly designated opportunity zones, increasing their interest in affordable housing projects.

Some hospitals, she said, may use their cash reserves to invest in housing projects that generate a lower return than other investment options because it furthers their mission, not just their profits.

In other cases, hospital systems play a facilitator role—using their access to cheap credit or serving as an anchor tenant in a larger development—to help get a project off the ground.

“Housing is not their business,” Guerrero said. “It’s not an easy space to get into if you don’t have the experience, if you don’t have a real estate development team in-house to understand how to put these deals together.”

CUTTING COSTS

In the southwestern corner of Colorado, Centura Health’s Mercy Regional Medical Center has partnered with Housing Solutions for the Southwest to prioritize housing vouchers for frequent users of the emergency room.

Under a program funded by the Catholic Health Initiatives, Mercy hired a social worker and a case manager to review records of frequent emergency room patients. They quickly realized how big an issue housing was for those patients. Many had diabetes and depended on insulin—which needs refrigeration. Kidney failure was one of the most costly diagnoses for the hospital.

Once patients received housing vouchers and found stable housing, though, costs began to drop.

“We now knew where they were. We knew that they had a safe place to live,” said Elsa Inman, program coordinator at Mercy Regional. “We knew they would be more effective in managing their chronic conditions.”

The patients with stable housing were more likely to make it to their primary care and specialist appointments, more likely to stay on top of medications and keep their chronic conditions in check.

The combination of intensive case management and patient engagement helped to halve ER visits for the first 146 patients in the program, saving nearly $495,000 in Medicaid spending in less than three years.

“Hospitals are businesses and nonprofits are businesses,” said Brigid Korce, program development director for Housing Solutions. “They are bottom-line, dollars-and-cents people.”

Inman acknowledged that the hospital might have missed out on some revenue by reducing ER use by these patients. Hospitals are still largely paid by the number of patients they treat and the number of services they provide.

But most of those patients were covered by Medicaid, so reimbursements were low anyway. And the move freed up more ER beds for patients with more critical needs.

“We want to be prepared for life-threatening conditions,” Inman said. “If you’ve got most of your beds taken up by someone who can be receiving patient care outside in the community, then that’s the right thing to do.”

That was less of an issue for the inpatients at Denver Health. Because hospitals are generally paid a fixed amount for a given diagnosis, the longer a patient stays in the hospital, the more money the hospital loses.

“They’ve basically exhausted their benefit under any plan because they don’t meet medical necessity anymore,” Burnette said. “If they had a home, they would go home. But they don’t, so they stay in the hospital.”

 

 

 

Hospitals of All Sizes Experience Profitability Declines in August

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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.

 

 

 

 

 

 

Trial approaching in Sutter Health antitrust case

https://www.modernhealthcare.com/legal/trial-approaching-sutter-health-antitrust-case?utm_source=modern-healthcare-daily-finance&utm_medium=email&utm_campaign=20190923&utm_content=article1-readmore

Spurred in part by the Affordable Care Act, hospitals across the country have merged to form massive medical systems in the belief it would simplify the process for patients.

But a simpler bill doesn’t always guarantee a cheaper bill.

That’s a key issue in an antitrust lawsuit against one of California’s largest hospital systems set to begin Monday.

About 1,500 self-funded health plans have sued Sutter Health, a system that includes 24 hospitals across Northern California. The case has dragged on since 2014, but it picked up steam last year when Attorney General Xavier Becerra filed a similar lawsuit. The cases have been combined and jury selection begins Monday. Opening arguments are scheduled for October.

The lawsuit alleges Sutter Health gobbled up competing medical providers in the region and used its market dominance to set higher prices for insurance plans, which means more expensive insurance premiums for consumers.

Becerra points to a 2018 study that found unadjusted inpatient procedure prices are 70% higher in Northern California than Southern California. The lawsuit notes Sutter Health’s assets were $15.6 billion at the end of 2016, up from $6.4 billion in 2005.

“We never meant for folks to use integration to boost their profits at the expense of consumers,” Becerra said.

It’s rare for antitrust lawsuits of this size to go to trial because the law allows for triple damages — a prospect that often spooks companies into settling outside of court to avoid an unpredictable jury. Health plans in this case are asking for $900 million in damages, meaning Sutter Health could take a nearly $3 billion hit.

Atrium Health, a North Carolina-based hospital system, settled a similar anti-trust lawsuit with the federal government last year. And CHI Franciscan, a health system based in Washington state, also settled similar claims in March that had been brought by the state.

But Sutter Health is fighting the case. The company says the lawsuit is not about its prices, but about insurance companies who want to maximize their own profits. Sutter Health officials insist the company faces fierce competition, vowing to detail in court the expansion of other health systems in the San Francisco Bay Area and the Sacramento Valley.

Four Sutter Health hospitals had operating losses in 2018, totaling $49 million.

“The bottom line is that this lawsuit is designed to skew the healthcare system to the advantage of large insurance companies so they can market inadequate insurance plans to Californians,” said Sutter Health Director of Public Affairs Amy Thoma Tan.

At issue are several of Sutter Health’s contracting policies that Becerra says have allowed the company to “thoroughly immunize itself from price competition.”

One way insurance companies keep costs down is to steer patients to cheaper health care providers through a variety of incentives. Becerra says Sutter Health bans insurance companies from using these incentives, making it harder for patients to use their lower-priced competitors.

Becerra also says Sutter has an “all or nothing” approach to negotiating with insurance companies, requiring them to include all of the company’s hospitals in their provider networks even if it doesn’t make financial sense to do so.

The case was originally filed by a trust of Northern California’s largest unionized grocery companies in 2014. A representative for the trust said it was “unknowingly forced to pay Sutter’s artificially high prices.”

But the company says these contracting practices are designed to protect patients. People often are unable to pick which hospital they go to in a medical emergency, which can lead to surprise bills when they learn a hospital or doctor was not in their network.

Jackie Garman, lawyer for the California Hospital Association, said these contracting practices are standard at a lot of hospitals. If the lawsuit is successful, she said it could “disrupt contracting practices at a lot of other systems.”

But the consequences of not bringing the lawsuit could be greater, Becerra said.

“We are paying every time we allow an anti-competitive behavior to drive the market,” he said.

 

 

 

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.