Quorum says it may have to file for bankruptcy


Dive Brief:

  • For-profit hospital operator Quorum Health said in a recent filing with the Securities and Exchange Commission that it may have to file for Chapter 11 bankruptcy to address current liquidity needs while continuing to care for patients and keep its hospitals operating.
  • The company said it’s in ongoing discussions with certain debt holders concerning a recapitalization or financial reorganization transaction.
  • Quorum also announced in the SEC filing that it will be late to file its annual 10-K report, covering financials for its fiscal year ending December 31, 2019.

Dive Insight:

COVID-19 has upended hospitals’ typical operations, prompting many to halt lucrative elective surgeries and cancel doctors visits to preserve staff and resources. Some worry those patients and revenue may never come back as unemployment claims go up and people lose their employer-sponsored health coverage. 

Tennessee-based Quorum Health, which operates 24 hospitals in 14 states, may have already been more ill-positioned financially than other systems for such a pandemic.

Quorum missed Wall Street earnings expectations in its most recent financials for the third quarter of 2019, posting a net loss of almost $76 million and a revenue decline almost 9% year over year. The company now said it’s delaying its 10K report with its most recent financials due to restructuring talks, but has 15 days to do so.

The for-profit chain went public in May 2016 with 38 hospitals – 14 of which have since shuttered. In 2017 private equity firm KKR took a 5.6% stake in the system for $11.3 million. 

Beyond being Quorum’s largest debt-holder today, KKR also owns about 9% of its public shares. In December, the firm offered to buy Quorum out and take the hospital chain private at $1 a share.

While negotiating with debt holders and weighing its options, Quorum intends to maintain all operations at its hospitals without any interruption in service, CEO Robert Fish said in a statement.

“Our facilities play a critically important role in their communities and the fight against COVID-19,” Fish said. “We are intensely focused on ensuring our employees have the resources they need to provide quality care to the patients and communities they serve, now and well into the future.”




Philadelphia Hospital to Stay Closed After Owner Requests Nearly $1 Million a Month

Philadelphia Hospital to Stay Closed After Owner Requests Nearly ...

Hahnemann University Hospital could hold 500 patients with the coronavirus. But city officials said the cost was too steep.

A hospital with room for nearly 500 beds has been closed for months in the center of Philadelphia, a city bracing for the spread of the coronavirus and a crush of sick patients.

But the facility will remain empty, city officials said, because they cannot accept the owner’s offer: buy the hospital or lease it for almost $1 million a month, including utilities and other costs.

“We don’t have the need to own it nor the resources to buy it. So we are done and we are moving on,” Mayor Jim Kenney told reporters on Thursday during the city’s daily briefing.

The next day, he said that Temple University would let the city use a music and sports venue for free. The city would no longer pursue the closed facility, Hahnemann University Hospital.

The abrupt end of the dispute underscored the frantic search for more hospital beds as cities try to prepare for a crisis that is overwhelming medical facilities in New York, and highlighted the tensions between government officials and businesses in responding to the pandemic. This week, the Trump administration backed away from announcing a $1 billion deal with General Motors and Ventec Life Systems to produce ventilators, after officials said they needed more time to assess the estimated cost.

In Philadelphia, coronavirus infections are quickly rising. On Friday, the city health commissioner, Dr. Thomas Farley, reported 154 new cases, for a total of 637 cases across every ZIP code of the city, and three deaths. “This virus is everywhere in Philadelphia,” he said.

The owner of the hospital, Joel Freedman of Broad Street Healthcare Properties, a real estate company, said he had offered to sell the facility to the city well below market price, or to lease it for $60 a bed a day, far less than what two other hospitals in California agreed to charge to lease their facilities.

“Anyone looking at the apples-to-apples comparison can see that Mr. Freedman not only desired to be helpful to the city of Philadelphia and its leaders, but he was very reasonable,” said Sam Singer, a spokesman for Mr. Freedman, who is based in Los Angeles. “We’re disappointed that they didn’t accept what we offered, but we stand ready to be helpful to the city or the state if they want to reopen discussions.”

Hahnemann Hospital, which once served the city’s poorest patients, closed in September 2019. The hospital had been suffering millions of dollars in losses a month, Mr. Freedman told The Philadelphia Business Journal last June.

“We relentlessly pursued numerous strategic options to keep Hahnemann in operation, and have been uncompromising in our commitment to our staff, patients and community,” Mr. Freedman said at the time. “We are faced with the heartbreaking reality that Hahnemann cannot continue to lose millions of dollars each month and remain in business.”

The decision to close the hospital last year infuriated local leaders and led Senator Bernie Sanders, the Vermont independent running to be the Democratic nominee for president, to hold a rally outside the hospital. He described the closure as a consequence of greed, and an example of the need for a better health care system.

Mr. Singer said Mr. Freedman had been unfairly maligned throughout the recent dispute, and that his obligations included maintenance, compensating his staff and paying off the loan he took out to buy the property.

“They’ve wrongly been critical of Mr. Freedman,” Mr. Singer said of his detractors. “We understand that emotions are high. We don’t want in any way to hold that against them.”

He added, “Even with those harsh words, our doors, our ears, our minds are still open. We want to help.”

Since last fall, the hospital has sat empty and fallen into disrepair, Mayor Kenney said on Thursday. “It has no beds and would require extensive work to make it usable again,” he said.

Mr. Kenney said the city had offered to lease the hospital for a “nominal” amount and pay for its maintenance and expenses, a deal that would have meant “hundreds of thousands of dollars a month” for Mr. Freedman and made the property more marketable in the future.

“Yet the owner would not agree to our offer,” he said.

Instead, Mr. Freedman wanted the city to pay $400,000 a month in rent in addition to making improvements and paying for other expenses, Mr. Kenney said. “I’ll let others decide whether that’s reasonable or not,” Mr. Kenney said.

Mr. Singer said the city contacted Mr. Freedman around March 11 about leasing the property. “We responded immediately and said, ‘Yes, we would like to help in any manner,’” he said.

Mr. Freedman offered to sell the property below market price or lease it for $27 a bed a day. The city would have to pay an additional $33 a bed a day to cover the costs of utilities and taxes, he said. The full amount came to about $910,000 a month, Mr. Singer said.

“They just decided, ‘We’re not going to pursue Hahnemann,’” he said.

City officials had signaled that negotiations were breaking down earlier this week. On Tuesday, the city’s managing director, Brian Abernathy, told reporters that what Mr. Freedman wanted was “unreasonable.”

“I think he’s looking at this as a business transaction rather than providing an imminent and important aid to the city and our residents,” Mr. Abernathy said.

City Councilor Helen Gym said on Twitter that day that Philadelphia should not let “unconscionable greed to get in the way of saving lives,” and called for acquiring the property through eminent domain. Mr. Kenny said city officials had explored that option but determined it was too time-consuming and would require them to purchase the building at market price.

Mr. Kenney said in a news conference Friday that the city would use the Liacouras Center, a concert and sports venue at Temple University, for additional hospital space. The university will let the center be used for free and the space can fit up to 250 beds, officials said.




California hospital secures $20M to stave off closure


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The San Mateo County (Calif.) Board of Supervisors voted March 10 to allocate $5 million annually over the next four years to keep Seton Medical Center in Daly City, Calif., open, according to Bay City News.

The county supervisors voted 4-1 to give $20 million in funding to the company that buys the hospital from El Segundo, Calif.-based Verity Health. The funding package will come with conditions, including that the purchaser must keep the hospital open and fully functional.

Verity entered Chapter 11 bankruptcy in August 2018. In January, the health system closed St. Vincent Medical Center, a 366-bed hospital in Los Angeles, after a deal to sell four of its hospitals fell through. The system had been planning to close Seton Medical Center as soon as this week, according to the report.

There are currently two companies bidding to purchase the hospital in Daly City and Seton Coastside in Moss Beach, Calif. The funding will help ensure Seton Medical Center, which sees roughly 27,000 patients per year, keeps its doors open.




UnitedHealth likely to keep squeezing physician staffing firms


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The nation’s largest private insurer has been terminating its contracts with physician staffing firms in a bid to extract lower prices, part of a years-long pattern analysts say could spur other payers to follow.

UnitedHealthcare contends it is simply trying to curb the rising cost of healthcare by driving out high-cost providers that charge far more than the median rate in its network. The payer said it had hoped to keep these firms in network “at rates that reflect fair market prices,” a UnitedHealthcare spokesperson told Healthcare Dive.

The most recent action targeted Mednax, a firm that provides specialty services including anesthesia, neonatology and high-risk obstetrics in both urban and rural areas. United cut Mednax contracts in four states, pushing those providers out of network, potentially putting patients at risk of balance bills.

United also recently canceled its in-network contracts with U.S. Anesthesia Partners in Texas, starting in April, which caused Moody’s to change its outlook to negative for the provider group because the contracts represent 10% of its annual consolidated revenue.

These latest moves to end relationships with certain physician staffing firms seem to have escalated in recent years, Sarah Kahn, a credit analyst for S&P Global, told Healthcare Dive.

Since the insurer’s 2018 tussle with ER staffing firm Envision, “it’s sort of ramped up and become more aggressive and more abrupt and more pervasive,” Kahn said of the contract disputes.


United said the volume of negotiations it’s involved in has not changed in recent years, and added that it expects to renegotiate the same amount of contracts in 2020 that it did in 2019. However, United pointed a finger at a small number of physician staffing firms, backed by private equity, that are attempting to apply pressure on United to preserve the same high rates.

Private equity firms have been increasingly interested in healthcare over the past few years, accelerating acquisitions of medical practices from 2013 to 2016. Private equity acquired 355 physician practices, representing 1,426 sites of care and more than 5,700 physicians over that time frame, according to recent research in JAMA. The firms had a particular focus on anesthesiology with 69 practices acquired, followed by emergency physicians at 43.

Mednax is a publicly traded company. But Envision is owned by investment firm KKR; TeamHealth is owned by private equity firm Blackstone; and U.S. Anesthesia Partners is backed by Welsh, Carson, Anderson & Stowe.


Proposed legislation around surprise billing may be influencing United’s actions, Kailash Chhaya, vice president and senior analyst at Moody’s, told Healthcare Dive. Congress has been weighing legislation that seeks to eliminate surprise billing, mainly through two vehicles, either using benchmark rates or arbitration.

If Congress ultimately decides on a bill that uses benchmark rates, or ties reimbursement for out-of-network providers to a benchmark rate (or average), it would benefit insurers like United to lower its average rate for certain services, Chhaya said. One way to do that is to end relationships with high-cost providers.

“It would help payers like UnitedHealth if that benchmark rate is low,” Chhaya said.

In late 2018, United threatened to drop Envision from its network, alleging the firm’s rates were responsible for driving up healthcare costs, according to a letter the payer sent hundreds of hospitals across the country. United and Envision eventually agreed to terms, but United seemed to outmuscle Envision as the deal secured “materially lower payment rates for Envision” that resulted in lower earnings, S&P Global analysts wrote in a recent report.

In 2019, United began terminating its contracts with TeamHealth, which has a special focus on emergency medicine. The terminations affect two-thirds of TeamHealth’s contracts through July 1. The squeeze from United caused Moody’s to also change Team Health’s outlook to negative as an eventual agreement would likely mean lower reimbursement and lower profitability for company, the ratings agency said.

“They’re trying to lower their payments to providers. Period,” David Peknay, director at S&P Global, told Healthcare Dive.​


Data shows prices — not usage — is driving healthcare spending. Physician staffing firms are frequently used for ER services and the ER and outpatient surgery experienced the largest growth in spending between 2014 and 2018, according to data from the Health Care Cost Institute.

United said it had been negotiating with TeamHealth since 2017 and does not believe TeamHealth should be paid significantly more than other in-network ER doctors for the same services. United alleges its median rate for chest pains is $340. But if a TeamHealth doctor provides the care it charges $1,508.​

“As Team Health continues to see more aggressive and inappropriate behavior by payors to either reduce, delay, or deny payments, we have increased our investment in legal resources to address specific situations where we believe payor behavior is inappropriate or unlawful,” according to a statement provided to Healthcare Dive.

TeamHealth said it will not balance bill patients in the interim.


The pressure from payers, particularly United, is unlikely to relent. The payer insures more than 43 million people in the U.S. through its commercial and public plans.

“I don’t think anyone is safe from such abrupt terminations,” Kahn said. However, United disputes the characterization of abruptly terminating contracts and says in many cases it has been negotiating with providers to no avail.

Likely targets in the future may include firms with a focus on emergency services, which tend to be high-cost areas, S&P’s analysts said. In their latest report, Kahn and Peknay pointed to The Schumacher Group, which is the third-largest player in emergency staffing services. However, it commands a market share of less than 10%, far less than its rivals Envision and TeamHealth.

Smaller firms may not be able to weather the pressure as effectively as very large staffing organizations.

For those smaller groups, it may be wise for them “to sit tight on their cash or prepare from some pressure,” Kahn said.

Although some believe it may influence other payers to follow suit, Dean Ungar, vice president and senior analyst with Moody’s, said United may be uniquely placed to exert this pressure because it has its own group of providers it can use and considerable scale.

“They are better positioned to play hardball,” Ungar said.





Health plans ramp up physician practice acquisitions



Health systems and private equity firms aren’t the only ones aggregating physician practices—many large insurers are rapidly acquiring or affiliating with physician groups, especially to support their Medicare Advantage (MA) strategies.

As the map below shows, most insurers are focusing this vertical integration in states like Florida, Texas, and California—places where they also have large populations of MA beneficiaries. Astonishingly, UnitedHealth Group—through its Optum division—is likely the largest employer of physicians in the US, employing or affiliating with 50,000 physicians—roughly 5,000 more than HCA Healthcare and nearly double the number of Kaiser Permanente. The number of Optum-controlled physicians has increased rapidly in recent years, the result of many large-scale deals, including the $4.3B acquisition of DaVita Medical Group.

When it comes to leveraging this growing physician network, United is setting its sights well beyond Medicare Advantage, as demonstrated by its recent introduction of Harmony, a commercial narrow network health plan in Southern California based almost exclusively on a network of Optum physicians.

Meanwhile, Humana’s physician strategy has focused more on affiliations with non-traditional groups serving MA patients, including Iora Health and Oak Street Health—though Humana also has two large primary care groups, Conviva and Partners in Primary Care, the latter of which just secured a $600M private equity investment to expand.

Notably absent from this map is Aetna, which has been pursuing a different strategy, focused around steering its MA population to its advanced practice provider-run HealthHUBs in CVS pharmacies.

This trend of insurer acquisition of physicians is obviously worrisome for health systems, as the health plans they negotiate with for payment are now directly competing with them at the front end of the delivery system.  



It’s Not Just Hospitals That Are Quick To Sue Patients Who Can’t Pay


Social worker Sonya Johnson received a civil warrant to appear in court when the company that runs Nashville General Hospital’s emergency room threatened to sue her over a $2,700 ER bill — long after she’d already negotiated a reduced payment schedule for the rest of her hospital stay.

Nashville General Hospital is a safety net facility funded by the city. For a patient without insurance, this is supposed to be the best place to go in a city with many hospitals. But for those who are uninsured, it may have been the worst choice in 2019.

Its emergency room was taking more patients to court for unpaid medical bills than any other hospital or practice in town. A WPLN investigation finds the physician-staffing firm that runs the ER sued 700 patients in Davidson County during 2019.

They include patients such as Sonya Johnson, a 52-year-old social worker and single mother.

By juggling her care between a nonprofit clinic and Nashville General, Johnson had figured out how to manage her health problems, even though she was, until recently, uninsured. In 2018, she went in to see her doctor, who charges patients on a sliding scale. Her tongue was swollen and she was feeling weak. The diagnosis? She was severely anemic.

“He called me back that Halloween day and said, ‘I need you to get to the emergency [room], stat — and they’re waiting on you when you get there,’ ” she recalls.

Nashville General kept her overnight and gave her a blood transfusion. They wanted to keep her a second night — but she was worried about the mounting cost, so asked to be sent home.

Staying overnight even the one night meant she was admitted to the hospital itself, and the bill for that part of her care wasn’t so bad, Johnson says. The institution’s financial counselors offered a 75% discount, because of her strained finances and because her job didn’t offer health insurance at the time.

But emergency rooms are often run by an entirely separate entity. In Nashville General’s case, the proprietor was a company called Southeastern Emergency Physicians. And that’s the name on a bill that showed up in Johnson’s mailbox months later for $2,700.

“How in the world can I pay this company, when I couldn’t even pay for health care [insurance]?” Johnson asks.

Johnson didn’t recognize the name of the physician practice. A Google search doesn’t help much. There’s no particular website, though a list of Web pages that do turn up in such a search suggest the company staffs a number of emergency departments in the region.

Johnson says she tried calling the number listed on her bill to see if she could get the same charity-care discount the hospital gave her, but she could only leave messages.

And then came a knock at her apartment door over the summer. It was a Davidson County sheriff’s deputy with a summons requiring Johnson to appear in court.

“It’s very scary,” she says. “I mean, [I’m] thinking, what have I done? And for a medical bill?”

Nashville General Hospital was no longer suing patients

Being sued over medical debt can be a big deal because it means the business can get a court-ordered judgment to garnish the patient’s wages, taking money directly from their paycheck. The strategy is meant to make sure patients don’t blow off their medical debts. But this is not good for the health of people who are uninsured, says Bruce Naremore, the chief financial officer at Nashville General.

“When patients owe money, and they feel like they’re being dunned all the time, they don’t come back to the hospital to get what they might need,” he says.

Under Naremore’s direction in the past few years, Nashville General had stopped suing patients for hospital fees. He says it was rarely worth the court costs.

But Southeastern Emergency Physicians — which, since 2016, has been contracted by the hospital to run and staff its emergency department — went the other way, filing more lawsuits against patients than ever in 2019.

Naremore says the decision on whether to sue over emergency care falls to the company that staffs the ER, not Nashville General Hospital.

“It’s a private entity that runs the emergency room, and it’s the cost of doing business,” he says. “If I restrict them from collecting dollars, then my cost is going to very likely go up, or I’m going to have to find another provider to do it.”

This is a common refrain, says Robert Goff. He’s a retired hospital executive and board member of RIP Medical Debt. The nonprofit helps patients who are trapped under a mountain of medical bills, which are the No. 1 cause of personal bankruptcy.

“So the hospital sits there and says, ‘Not my problem.’ That’s irresponsible in every sense of the word,” Goff says.

The practice of suing patients isn’t new for Southeastern Emergency Physicians or its parent company, Knoxville-based TeamHealth. But such lawsuits have picked up in recent years, even as the company has stopped its practice of balance billing patients.

TeamHealth is one of the two dominant ER staffing firms in the nation, running nearly 1 in 10 emergency departments in the United States. And its strategy of taking patients to court ramped up after it was purchased by the private equity giant Blackstone, according to an investigation by the journalism project MLK50 in Memphis.

Under pressure from journalists, TeamHealth ultimately pledged to stop suing patients and to offer generous discounts to uninsured patients.

Officials from TeamHealth declined WPLN’s request for an interview to answer questions about how widespread its practice of suing patients for ER doctors’ services and fees has been.

“We will work with patients on a case by case basis to reach a resolution,” TeamHealth said in an email.

According to court records obtained by WPLN, the firm filed about 700 lawsuits against patients in Nashville in 2019. That’s up from 120 in 2018 and just seven in 2017. Its only contract in the city is with Nashville General’s ER, and the patients reached by WPLN say they were uninsured when they were sued.

What’s surprising to Mandy Pellegrinwho has been researching medical billing in Tennessee at the nonpartisan Sycamore Institute, is that it was all happening at Nashville General — where treating uninsured patients is part of the hospital’s mission.

“It is curious that a company that works for a hospital like that might resort to those sorts of actions,” Pellegrin says.

TeamHealth halts suits, pledges to drop cases

As for Sonya Johnson — she eventually went to court and worked out a payment plan of $70 a month over three years.

And now TeamHealth tells WPLN that its intent is to drop pending cases.

“We will not file additional cases naming patients as defendants and will not seek further judgments,” a TeamHealth spokesperson says in an emailed statement. “Our intent is not to have these pending cases proceed. We’re working as expeditiously as possible on resolving individual outstanding cases.”

Johnson says she’s been told that the lawsuit Southeastern Emergency Physicians filed against her will be dropped — but that she still owes the $2,700 bill.




Humana doubles down on its primary care strategy


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Humana, the nation’s second largest Medicare Advantage (MA) insurer, is partnering with a private equity (PE) firm to expand its senior-focused subsidiary medical group, Partners in Primary Care.

The arrangement will be structured as a joint venture between Humana and Welsh, Carson, Anderson & Stowe, with a combined initial $600M investment that will give the PE firm majority ownership of the medical group. The new venture is likely to double the number of centers that Humana’s Partners in Primary Care operates—currently 47 throughout Texas, Kansas, Missouri, Florida and the Carolinas.

While Humana has been looking to grow its MA membership, patients need not be Humana members to access care at the centers. Humana has established other partnerships in the physician practice space, including last fall’s announcement that it is teaming up with Iora Health to add 11 additional Iora-branded primary care practices to its MA networks in Arizona, Georgia, and Texas.

Humana has previously partnered with private equity to acquire postacute providers Kindred Healthcare and Curo Health Services. These latest moves suggest the company is shifting its focus to the front end of the delivery system, looking to control costs of care for seniors by quickly building a primary care physician network focused on reducing high-cost referrals to hospitals and specialists.