Category Archives: Operating Performance

Nurse viewpoint: Modern healthcare system prioritizes profits over care quality

Posted on by • Posted in 2020 Election Issues, Health Policy, Health System, Hospital, Life-Saving Devices, Medicare for All, Operating Margin, Operating Performance, Outcomes, Pharmaceutical Industry, Quality of Care • Tagged • Leave a comment

https://www.beckershospitalreview.com/quality/nurse-viewpoint-modern-healthcare-system-prioritizes-profits-over-care-quality.html

The American healthcare system benefits companies, hospital systems and administrators over patients and providers, wrote Theresa Brown, PhD, BSN, RN, in an op-ed for CNN.

 Five highlights from Dr. Brown’s opinion piece:

1. Providers work in an environment of “scarcity,” whereas CEOs, pharmaceutical companies and hospital systems live in “a world of plenty.”

2. Dr. Brown cites her own experience at a teaching hospital in the University of Pittsburgh Medical Center system, where she says nurses who requested more life-saving devices were told to do “more with less,” despite the hospital system’s multibillion-dollar revenues.

3. Dr. Brown writes nurses at the teaching hospital also faced staff shortages, which have been shown to negatively affect patient health outcomes.

4. In contrast, 14 pharmaceutical companies made profits of at least $1 billion in 2018. Yet Dr. Brown argues that vilifying such companies misinterprets the problem, which is the long line separating cash-strapped hospital floors from the large profits that benefit systems, companies and administrators over patients.

5. Dr. Brown supports Medicare for All, writing that it is a critical measure for the 66 percent of American households that say they must choose between purchasing food and healthcare.

 

 

Wayne State tab for physician group bankruptcy may top $16 million

Posted on by • Posted in Bankruptcy, Chapter 11, Faculty Practice Plan, Health System, Hospital, Operating Performance, Reorganization, School of Medicine • Tagged • Leave a comment

https://www.modernhealthcare.com/finance/wayne-state-tab-physician-group-bankruptcy-may-top-16-million?utm_source=modern-healthcare-daily-finance&utm_medium=email&utm_campaign=20190610&utm_content=article6-readmore

Wayne State University is fronting what could potentially total more than $16 million in payments for the School of Medicine’s faculty practice, University Physician Group, to rebuild after bankruptcy.

U.S. Bankruptcy Court in Detroit last Monday approved UPG’s reorganization plan and exit from bankruptcy after the nonprofit medical practice suddenly filed for Chapter 11 bankruptcy protection in November.

After “extensive negotiations” with UPG, Wayne State agreed to provide financial assistance under a restructuring support agreement, according to a version of the reorganization plan submitted April 9.

Wayne State is, in essence, acting as a bank, providing exit financing to UPG for general unsecured creditor claims (it’s excluding claims by Wayne State and an affiliated nonprofit Fund for Medical Research and Education).

A 15-year term loan from Wayne State will be used to pay 80 percent of unsecured claims that are currently projected at approximately $10.7 million, but could rise as court proceedings are finalized, according to a document in U.S. Bankruptcy Court in Detroit.

The Detroit university is also providing a revolving loan of at least $2.5 million that could range up to $7.5 million for UPG’s working capital needs.

A Wayne State representative declined to provide additional comment on the restructuring plan.

The November bankruptcy filing was driven by discovery earlier in that year that financial losses of the 20-year-old faculty practice plan were double the $5.5 million expected and a new, more drastic turnaround plan was required, Crain’s reported at the time. Over the past decade, UPG’s number of physicians declined by 50 percent, which hurt clinical revenue and made its leased network of suburban offices untenable, the filing said.

The court-approved reorganization strategy created with consulting firm AlixPartners will help determine the future of UPG. It is expected to carry UPG from its 2018 loss of $8.1 million to $3 million in profit by 2022, according to the release and reorganization documents.

To carry out the reorganization, the practice plan’s leadership formed six interdisciplinary teams to “transform and modernize” financial operations, its footprint, patient access, doctor compensation, business relationships and organization culture, among other things, last week’s news release said.

Closing clinics

As part of restructuring, UPG is shrinking the amount of clinical space it operates from 260,000 square feet to 115,000 by the end of the year, Charles Shanley, M.D., University Physician Group’s president and CEO, told Crain’s on Tuesday. The practice plan downsized sites in Southfield, Dearborn and Livonia and closed its clinical practice locations in Lake Orion and Port Huron, as well as a surgical center in Troy.

“We desperately needed to consolidate and modernize the clinical footprint,” he said.

UPG is shrinking to seven sites, Shanley added. The large majority are in Midtown Detroit, with UPG opting to focus its presence less on the suburbs and more in Detroit and at WSU’s School of Medicine.

“We are on a path to be a leading urban academic practice, in a thriving city, recognized for innovative delivery of high-value care to the most complex and vulnerable members of the community,” Shanley said in the release. “Our future lies in streamlining access for the Detroit community … to high-quality and cost-effective care in collaboration with Detroit’s primary care physicians, federally qualified health centers, the Detroit Medical Center, Barbara Ann Karmanos Cancer Institute and Henry Ford Health System.”

The practice plan employs 244 physicians, with 23 more who have been hired and are in the credentialing process. A net total of five physicians have left since the bankruptcy filing.

UPG has been looking since last summer at sites around Midtown where it could create a multidisciplinary ambulatory site, allowing patients to walk a short distance to another specialist doctor instead of needing to travel to another facility.

It’s also looking at locations in Midtown where it could shift its administrative offices from Troy. That move-out is expected to finish by the end of October, marking the end of the site consolidation process.

Henry Ford, DMC ties

The November filing came several weeks after UPG and the Detroit Medical Center reached a five-year contract in September for clinical and medical administrative services. The deal renewed a longtime affiliation between the for-profit hospital chain owned by Tenet Healthcare Corp. of Dallas and the Wayne State group, appearing to calm what had been a disintegrating relationship.

UPG’s financial crisis — alongside mismanagement, lack of teamwork and other issues — have shown it will likely never become the large, profitable group envisioned by former Wayne State Medical School Dean John Crissman in 1999, Crain’s previously reported.

Wayne State University’s medical school also needs to look at revenue options to replace what it would have taken in through an affiliation deal with Henry Ford Health System, according to previous Crain’s reporting. Henry Ford Health System CEO Wright Lassiter III pulled the plug in March after months of negotiations.

The bankruptcy is unrelated to WSU’s negotiations with Henry Ford Health System, Shanley told Crain’s on Tuesday.

“I think there’s general enthusiasm among the leadership of the school of medicine and the university to maintain and enhance our relationship with Henry Ford and resume conversations toward a synergistic partnership,” he said. “We’re all enthusiastic and supportive of that. It’s critical to the mission of the school of medicine and it’s good for the city of Detroit. I think it’s just a matter of reinitiating those discussions.”

 

 

 

Bon Secours Mercy Health to sell majority stake of RCM to PE firm

Posted on by • Posted in Alternative Revenue Sources, Bon Secours Mercy Health, Health System, Hospital, Operating Performance, Outsourcing, Private Equity, Rev Cycle Management, Subsidiary, Talent Drain • Leave a comment

https://www.modernhealthcare.com/finance/bon-secours-mercy-health-sell-majority-stake-rcm-pe-firm?utm_source=modern-healthcare-daily-dose-thursday&utm_medium=email&utm_campaign=20190530&utm_content=article4-readmore

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Bon Secours Mercy Health plans to sell a majority stake of its revenue-cycle management subsidiary Ensemble Health Partners to private equity firm Golden Gate Capital, the organizations announced Thursday.

The Cincinnati-based Catholic health system aims to sell 51% of the equity in Ensemble netting $1.2 billion in cash proceeds, which will be reinvested in Bon Secours Mercy when the deal is completed following the standard regulatory approvals.

“Our bread and butter is not to be a revenue cycle management company, so we thought maybe it was time to spin it out as a private company,” said John Starcher, Bon Secours Mercy Health president and CEO, adding that Golden Gate has the capital and expertise to continue to build out Ensemble.

Founded in 2014, Ensemble has grown to 3,600 employees in 30 states that serve 27 health systems. Then-Mercy Health acquired Ensemble in 2016, when it worked with about eight health systems, and invested around $60 million.

At that time, Mercy was coming off a failed revenue cycle outsourcing venture and an attempt to bring it in-house as its cost to collect, point of service collections and other metrics were trending negatively, resulting in a $135 million shortfall in expected cash collections, Starcher said.

Ensemble has helped Mercy Bon Secours accrue about $400 million to its bottom line over a three-year period, he said.

“Our terrible numbers had righted in less than one year,” Starcher said.

More providers are outsourcing their scheduling, billing and collections services as patients shoulder more of their healthcare costs and bad debt levels grow. Hospitals and health systems are turning to specialists that claim to deliver on patient satisfaction goals, which are poised to have a greater impact on reimbursement rates. Outsourcing also allows providers to free up capital and mitigate compliance risks.

“There is a tremendous amount of pricing and rate pressure on health systems,” said Judson Ivy, founder and CEO of Ensemble, adding that consumerism is another driving force behind outsourcing revenue cycle management as consumers seek a better experience. “There is also a talent drain on the industry.”

Meanwhile, alternative revenue sources are becoming a bigger part of hospital and health systems’ strategies. Ninety percent of hospital and health system executives in a recent survey indicated that new revenue streams were an urgent priority and expected to yield a return in the next three years, a study from Boston-based Partners HealthCare and healthcare private equity firm Fitzroy Health found.

Pressure on reimbursement rates from government and commercial payers have driven investment in revenue cycle subsidiaries, commercial real estate ventures, consulting spin offs, supply chain companies and other endeavors.

Bon Secours Mercy Health also has an IT subsidiary that specializes in Epic installations and a call center venture that manages the patient journey, among others, Starcher said.

“We also have expertise as we look across the continuum in marketing, supply chain and HR, and we think this is a burgeoning opportunity,” he said.

But you can’t monetize a mediocre service, Starcher said, offering a word of caution. A subsidiary can’t be so tethered to a health system that it can’t be priced competitively with other standalone companies, he said.

“While many health systems talk about this a lot, it doesn’t mean that it has been done successfully,” Starcher said.

Mercy Health and Bon Secours Health System completed their merger in September 2018, expanding its combined network to 43 hospitals, more than $8 billion in net operating revenue and 57,000 employees.

Over a four-month period following the merger, the health system reported $58.9 million in recurring operating income, which excludes restructuring and integration expenses, on operating revenue of $2.7 billion. With the $95.5 million of one-time costs, its operating income fell to negative $36.6 million. Those losses included an impairment charge on the now-defunct HealthSpan Partners’ investment in Summa and merger-related costs.

That compared to $72.9 million in recurring operating income on revenue of $2.69 billion over the same period the year prior. Operating income fell slightly to $68.2 million with $4.7 million of one-time expenses.

 

Not-for-profit hospitals are financially resilient due to strong management, S&P Global Ratings says.

Posted on by • Posted in Ambulatory Care Services, Balance Sheet, Competition, Consumerism, Credit Quality, Credit Ratings, Debt Levels, Disruption, Excess Margin, Financial Ratios, Health Policy, Health System, Hospital, Key Performance Indicators, Low Interest Rates, Market Consolidation, Net Patient Service Revenue, Non-Profit Healthcare Industry, Operating Margin, Operating Performance, Reimbursement, Rev Cycle Management • Leave a comment

https://www.healthcarefinancenews.com/news/not-profit-hospitals-and-health-systems-have-shown-financial-resilience-due-strong-management?mkt_tok=eyJpIjoiTmpJME5qVTNOVEU1TXpRdyIsInQiOiJDdUIxQ1NKdng1b0FkQ1wvQlwvNFBTc1JIbmVwYUZOeUhCZ3VlNlZzdmhNbkhBQlhnXC9JeTI4c2NDeE80REk0YWJ1Nk1jSzl4QjFDbjFMTkxKdmVCblY1RUlSYTIwUmlhSEJ6VXpkOUZZdytUWDhaV1poaEljcVh5ZFdEOUdVZlQzZyJ9

The broad balance sheet shows hospitals are improving financial strength and flexibility compared to two decades ago.

Not-for-profit hospitals and health systems are financially keeping up with changes in the healthcare landscape, according to a new S&P Global Ratings report.

S&P Global Ratings said it believes the not-for-profit healthcare sector has been incredibly resilient over the past two decades, in large part due to strong management and governance.

The broad balance sheet shows improved financial strength and flexibility compared to two decades ago, as is also the case for maximum annual debt service coverage.

Hospitals have done this throughout a time when changes in government policy, reimbursement and the move to value-based care have been factors in their operating performance and financial position. The report shows more variability in operating revenue and excess margins. 

S&P Global looked at providers rated from BBB+ to AA. The stronger providers have seen margin improvement, while weaker rated providers have been generally stable with some pockets of weakness at the lowest reported rating levels, the report said.

WHY THIS MATTERS

Health system challenges include increasing levels of competition and disruption; consumerism and the heightened focus on quality measures and outcomes; the rapid growth in technology and big data analytics; the rise of population health and changes in payment delivery models; and a fundamental shift in how and where patients are treated.

“To be successful, provider management teams must adapt and adjust or run the risk of being left behind,” the credit analysts said.

A factor benefiting health systems has been the low interest rate environment. This has allowed hospitals to finance strategic capital assets, while keeping carrying costs at very manageable levels.

Industry consolidation has had a favorable impact on enterprise profiles, the report said.  While ample “horizontal” competition exists for both hospitals and health systems, in many markets consolidation has made it more manageable.

But competition between hospitals and health systems and new market entrants seeking to control niche services or some aspect of ambulatory care services is presenting new and rapidly evolving threats to enterprise profiles, the report said.

OUTCOMES

Net patient service revenue has risen across all S&P rated categories for both stand-alone and system providers. This is due to a variety of reasons, including the addition of more business lines such as physician and insurance services, and increased industry consolidation;

Operating and excess margins are more complicated, highlighting the ebb and flow of industry trends, including increased joint venture and affiliation activity and investment market volatility.

Maximum annual debt service coverage has grown in all but the weakest rated levels, highlighting an improving balance between operational performance and debt.

Growth in days’ cash on hand has been a universal success even as capital expenditures remain robust.

Debt levels have been favorable with an improved cushion ratio and declining debt as a percentage of capitalization, both well-established trends.

TREND

Momentum continues to build for major legislative and regulatory changes at both the national and state level.

Many of the hospitals and health systems in S&P Global’s rated portfolio have navigated through numerous changes. Historically, a review of ratios over time demonstrates that providers have responded well to change as a group, although results have varied among individual organizations.

While credit quality can and will change over time,  the majority of the rated portfolio is well-positioned to compete effectively as new strategies are required, the analysts said.

S&P Global Ratings analyzes and publishes not-for-profit healthcare median ratios annually, and has been doing so for over 20 years.

ON THE RECORD

“In our view, senior leadership and management teams have provided guidance and direction through a series of difficult and changing periods and have emerged as generally stronger organizations from a financial profile standpoint,” the credit analysts said. “We believe the vast majority of rated hospitals and health systems have the financial discipline and expertise to navigate the challenges over the next decade and beyond, and while there may be some movement in underlying trends in these key metrics, the overall financial outlook, barring any significant shocks from policy or macroeconomic shifts, should remain generally consistent.”