Providence posts $538M loss, lays out 3-part strategic plan

https://www.beckershospitalreview.com/finance/providence-posts-538m-loss-lays-out-3-part-strategic-plan.html?utm_medium=email

Providence St. Joseph Health Consolidates 14 Hospitals in SoCal ...

Providence, a 51-hospital system based in Renton Wash., received $651 million in federal grants in the first half of this year, but it wasn’t enough to offset the system’s losses tied to the COVID-19 pandemic. 

The health system reported revenues of $12.5 billion in the first six months of this year, down from $12.6 billion in the same period a year earlier, according to financial documents released Aug. 17. Though the health system reported a rebound in patient volumes after the suspension of non-emergency procedures in March and April, net patient service revenue was down 10 percent year over year.

Providence’s expenses also increased. For the first two quarters of this year, the health system reported operating expenses of $12.7 billion, up 3 percent year over year. The increase was attributed to higher labor costs and increased personal protective equipment and pharmaceutical spend.

Reduced patient volumes combined with increased costs drove an operating loss of $221 million in the first half of this year. In the first half of 2019, Providence reported operating income of $250 million.

After factoring in nonoperating items, Providence ended the first six months of 2020 with a net loss of $538 million, compared to net income of $985 million in the same period of 2019.

To help offset financial damage, Providence received $651 million in federal grants made available under the Coronavirus Aid, Relief and Economic Security Act. 

“We knew we were in for a marathon the moment we admitted our first patient with COVID-19 seven months ago,” Providence President and CEO Rod Hochman, MD, said in an earnings release. “Our caregivers have been on the front lines ever since, and we are incredibly proud and grateful for all they are doing to serve our communities during the greatest crisis of our lifetime.”

In its earnings release, Providence mapped out a three-part plan for the future. As part of that plan, the system said it is focused on improving testing capacity and turnaround times and advancing clinical research and best practices in the treatment of COVID-19. The system is also revising its operating model and cost structure. 

 

 

Canceled elective procedures putting pressure on nation’s hospitals

https://www.healthcarefinancenews.com/news/canceled-elective-procedures-putting-pressure-nations-hospitals

U.S. Hospitals Brace for 'Tremendous Strain' from New Virus - JEMS

Even upticks in COVID-19 patients haven’t made up for the revenue losses, since reimbursement for those services is comparatively slim.

Elective procedures are in a strange place at the moment. When the COVID-19 pandemic started to ramp up in the U.S., many of the nation’s hospitals decided to temporarily cancel elective surgeries and procedures, instead dedicating the majority of their resources to treating coronavirus patients. Some hospitals have resumed these surgeries; others resumed them and re-cancelled them; and still others are wondering when they can resume them at all.

In a recent HIMSS20 digital presentation, Reenita Das, a senior vice president and partner at Frost and Sullivan, said that during the pandemic, plastic surgery activity declined by 100%, ENT surgeries declined by 79%, cardiovascular surgeries declined by 53% and neurosurgery surgeries declined by 57%.

It’s hard to overstate the financial impact this is likely to have on hospitals’ bottom lines. Just this week, American Hospital Association President and CEO Rick Pollack, pulling from Kaufman Hall data, said the cancellation of elective surgeries is among the factors contributing to a likely industry-wide loss of $120 billion from July to December alone. When including data from earlier in the pandemic, the losses are expected to be in the vicinity of $323 billion, and half of the nation’s hospitals are expected to be in the red by the end of the year.

Doug Wolfe, cofounder and managing partner of Miami-based law firm Wolfe Pincavage, said this has amounted to a “double-whammy” for hospitals, because on top of elective procedures being cancelled, the money healthcare facilities received from the federal Coronavirus Aid, Relief, and Economic Security Act was an advance on future Medicare payments – which is coming due. While hospitals perform fewer procedures, they will now have to start paying that money back.

All hospitals are hurting, but some are in a more precarious position than others.

“Some hospital systems have had more cash on hand and more liquidity to withstand some of the financial pressure some systems are facing,” said Wolfe. “Traditionally, the smaller hospital systems in the healthcare climate we face today have faced a lot more financial pressure. They’re not able to control costs the same way as a big system. The smaller hospitals and systems were hurting to begin with.”

LOWER REVENUE, HIGHER COSTS

Some hospitals, especially ones in hot spots, are seeing a surge in COVID-19 patients. While this has kept frontline healthcare workers scrambling to care for scores of sick Americans, COVID-19 treatments are not reimbursed at the same level as surgeries. Hospital capacity is being stretched with less lucrative services.

“Some hospitals may be filling up right now, but they’re filling up with lower-reimbursing volume,” said Wolfe. “Inpatient stuff is lower reimbursement. It’s really the perfect storm for hospitals.”

John Haupert, CEO of Grady Health in Atlanta, Georgia, said this week that COVID-19 has had about a $115 million negative impact on Grady’s bottom line. Some $70 million of that is related to the reduction in the number of elective surgeries performed, as well as dips in emergency department and ambulatory visits. 

During one week in March, Grady saw a 50% reduction in surgeries and a 38% reduction in ER visits. The system is almost back to even in terms of elective and essential surgeries, but due to a COVID-19 surge currently taking place in Georgia, it has had to suspend those services once again. ER visits have only come back about halfway from that initial 38% dip, and the system is currently operating at 105% occupancy.

“Part of what we’re seeing there is reluctance from patients to come to hospitals or seek services,” said Haupert. “Many have significantly exacerbated chronic disease conditions.”

Patient hesitation has been an ongoing problem, as has the associated cost of treating coronavirus patients, said Wolfe.

“When they were ramping up to resume the elective stuff, there was a problem getting patients comfortable,” he said. “And the other thing was that the cost of treating patients in this environment has gone up. They’ve put up plexiglass everywhere, they have more wiping-down procedures, and all of these things add cost and time. They need to add more time between procedures so they can clean everything … so they’re able to do less, and it costs more to do less. Even when elective procedures do resume, it’s not going back to the way it was.”

Most hospitals have adjusted their costs to mitigate some of the financial hit. Even some larger systems, such as 92-hospital nonprofit Trinity Health in Michigan, have taken to measures such as laying off and furloughing workers and scaling back working hours for some of its staff. At the top of the month, Trinity announced another round of layoffs and furloughs – in addition to the 2,500 furloughs it announced in April – citing a projected $2 billion in revenue losses in fiscal year 2021, which began on June 1.

Hospitals are at the mercy of the market at the moment, and Wolfe anticipates there could be an uptick in mergers and consolidation as organizations look to partner with less cash-strapped entities. 

“Whether reorganization will work remains to be seen, but there will definitely be a fallout from this,” he said.

 

 

 

 

COVID-19 to cost hospitals $323 billion, American Hospital Association says

https://www.beckershospitalreview.com/finance/covid-19-to-cost-hospitals-323-billion-american-hospital-association-says.html?utm_medium=email

Catastrophic financial impact of COVID-19 expected to top $323 ...

Hospitals will lose $323.1 billion this year because of the COVID-19 pandemic, according to a new report from the American Hospital Association. 

The total includes $120.5 billion in financial losses the association predicts hospitals will see from July through December on top of $202.6 billion in losses they estimated between March and June. The losses are in large part due to lower patient volumes.

“While potentially catastrophic, these projected losses still may underrepresent the full financial losses hospitals will face in 2020, as the analysis does not account for currently increasing case rates in certain states, or potential subsequent surges of the pandemic occurring later this year,” the AHA said.

Hospitals and health systems are reporting an average decline of 19.5 percent in inpatient volume and 34.5 percent in outpatient volume when compared to baseline levels from last year. Most hospitals don’t expect to return to last year’s levels in 2020.

Read the full report here.

 

 

 

Quorum Health to emerge from bankruptcy next month

https://www.healthcaredive.com/news/quorum-bankruptcy-approval-emerging-in-july/580805/

Dive Brief:

  • For-profit hospital operator Quorum Health received approval of its plan to recapitalize the business Monday in U.S. Bankruptcy Court for the District of Delaware. Quorum expects to emerge from bankruptcy in early July, according to regulatory filings.
  • The system filed for Chapter 11 bankruptcy April 7 to address current liquidity needs while continuing to care for patients and keep its hospitals operating amid a pandemic, according to a statement. It entered into a restructuring agreement with a majority of its lenders and noteholders.
  • Quorum still needs the court to issue a final order, but said the reorganization will reduce its debt by about $500 million, as originally expected.

Dive Insight:

Tennessee-based Quorum Health, which operates 22 rural and mid-sized hospitals in 13 states, may have been more ill-positioned financially than other systems going into the pandemic.

The company 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.

But that didn’t pan out, and Quorum instead ended up filing for bankruptcy in April, soon after the COVID-19 pandemic hit. The restructuring agreement now “allows our company to begin a new chapter with the flexibility and resources to continue supporting our community hospitals as they serve on the frontlines of this pandemic and beyond,” Marty Smith, Quorum’s executive vice president and chief operating officer, said in a statement Monday.

“We are grateful for the confidence of our financial stakeholders and partners, as well as our dedicated employees and physicians, and look forward to building on the significant progress we have made in strengthening our operations in recent years,” he said.

 

 

 

 

Hoag sues to end Providence affiliation

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/hoag-sues-to-end-providence-affiliation.html?utm_medium=email

Hoag Memorial Hospital Presbyterian | Visit Newport Beach

Hoag Memorial Hospital Presbyterian, a two-hospital network based in Newport Beach, Calif., is trying to sever its ties to Renton, Wash.-based Providence. 

Hoag announced May 4 that it has filed a lawsuit in an attempt to dissolve its affiliation with Providence. Hoag said it filed the lawsuit after a year of attempted negotiations.

“Hoag must be able to keep local resources and decision making in Orange County to address all the health needs of community members for years to come,” Robert T. Braithwaite, president and CEO of Hoag, said. “The current structure of our relationship with Providence, we believe, is not in the best interest of our patients, the community, our physicians and team members.”

The link up dates back to 2012 when Hoag entered into an affiliation agreement with Irvine, Calif.-based St. Joseph Health, which has since been acquired by Providence, a 51-hospital system.

“Under the existing affiliation, Hoag’s mission and legacy are at risk of being diluted within a large national hospital system,” Mr. Braithwaite said. “We must be able to maintain Hoag’s unique character and role as Orange County’s most trusted health care network, as well as keep local control of community assets.”

Regarding Hoag’s lawsuit, officials from Providence released the following statement to The Orange County Register:

“Now, at a time when all hospitals and health systems are battling the COVID-19 pandemic, the Hoag leaders took legal action to sever its relationship with Providence for reasons that remain unclear,” said the statement from Providence. “Our relationship has been strong since 2012. The Hoag leaders’ so-called ‘realignment’ plan would negatively impact patient care, diminish resources and medical expertise available to Orange County.”