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‘It remains to be seen’ whether acute care, nonprofit hospital profitability has peaked, Fitch says
Fitch Ratings has released a new report in response to questions from U.S. investors about whether acute care, nonprofit hospitals’ operating profitability has peaked or can be improved.
Four takeaways:
1. Fitch said acute care, nonprofit hospitals experienced across-the-board deterioration of operating margins in 2017, and the trend is expected to repeat this year. But acute care, nonprofit hospitals’ balance sheet metrics, such as days cash on hand, cash to debt and debt to capitalization, are at an all-time high.
2. Amid declining operating margins, large system providers plan to reduce costs and inefficiencies and are rethinking care delivery, according to Fitch Senior Director Kevin Holloran. He said smaller providers face greater challenges because they “are characteristically less able to trim expenses and typically unable to negotiate higher rates from commercial insurers in their markets.”
3. Fitch concluded: “It remains to be seen whether we are at a peak or if there is further room to improve.”
4. However, the ratings agency is certain of one thing: Nonprofit hospital systems will continue to consolidate. Fitch said investors have asked it whether increased size and scale through consolidation is advantageous as far as credit ratings.
“Size and scale are ‘better’ for a hospital’s rating if its enhanced size and scale means improved operations, stronger balance sheets and more market essentiality,” said Mr. Holloran.”Conversely, a hospital getting bigger just for the sake of getting bigger at times can lead to an initial dip in operating profitability as the two or more organizations come together.”
Access the full report here.
CHI, Dignity unveil name for combined system
CHI CEO Kevin Lofton, left, and Dignity CEO Lloyd Dean
Englewood, Colo.-based Catholic Health Initiatives and San Francisco-based Dignity Health have picked a name for the combined system their proposed mega-merger will create: CommonSpirit Health.
“CommonSpirit Health was chosen because of its strong association with the two systems’ missions of service and positive resonance with the diversity of people served,” the systems said in a joint press release. “It evokes the strategic vision and aspiration of the new ministry to advance health for all and make a positive change for the people and communities served; a belief that all people deserve access to high-quality health and healthcare; and a passion to serve those who are sick and injured, including those who are most vulnerable.”
The systems evaluated more than 1,200 names before landing on CommonSpirit Health.
CHI and Dignity signed a definitive agreement to merge in December 2017, and the organizations expect to complete the transaction by the end of this year. The new $28.4 billion health system will include more than 700 care sites and 139 hospitals.
THE 4C’S OF COURAGEOUS ACCOUNTABILITY
7 CORE BEHAVIORS FOR HONORABLE LEADERSHIP
“Leadership consists of character and strategy. If you can’t have both, opt for character.”
“The day you plant the seed is not the day you eat the fruit. Be patient and stay the course.”
COLIN POWELL LEADERSHIP POINT
Do you agree with the Colin Powell leadership point?
The principle is “Command is lonely”.
“Harry Truman was right. Whether you’re a CEO or the temporary head of a project team, the buck stops here.
You can encourage participative management and bottom-up employee involvement, but ultimately the essence of leadership is the willingness to make the tough, unambiguous choices that will have an impact on the fate of the organization.
I’ve seen too many non-leaders flinch from this responsibility. Even as you create an informal, open, collaborative corporate culture, prepare to be lonely.”
15 hospital, health system construction projects worth $300M or more
Below are 15 hospitals or health systems that recently announced or completed construction projects worth more than $300 million in the last three months, reported by Becker’s Hospital Review.
1. Georgia approves $1.5B Children’s Healthcare of Atlanta hospital: 3 notes
Georgia approved Children’s Healthcare of Atlanta’s certificate of need application to replace the 325-bed children’s hospital in Atlanta with a larger one containing 446 beds, also in Atlanta.
2. California hospital opens $340M emergency pavilion
Washington Hospital in Fremont, Calif., opened its $340 million emergency and critical care pavilion Nov. 12.
3. Banner University Medical Center opens 16-story tower
Phoenix-based Banner University Medical Center opened its 16-story, $417.9 million patient tower Nov. 6.
4. Hackensack University Medical Center to break ground on $714M expansion next year
Hackensack (N.J.) University Medical Center is on track to begin its $714 million expansion in the first quarter of 2019.
5. City approves part of UPMC’s $2B expansion plan
The Pittsburgh Planning Commission approved on Oct. 23 UPMC’s plan to build a vision and rehabilitation hospital in Pittsburgh as part of the system’s $2 billion expansion.
6. Santa Barbara hospital completes $820M renovation
Santa Barbara (Calif.) Cottage Hospital completed a series of renovations Oct. 10 that totaled more than $820 million.
7. U of Maryland Shore Regional Health plans $350M replacement hospital
Baltimore-based University of Maryland Shore Regional Health filed a certificate of need for a $350 million hospital to replace Shore Medical Center in Easton (Md.)
8. $738M Coney Island Hospital renovation advances
Brooklyn, N.Y.-based NYC Health + Hospitals-Coney Island’s $738 million renovation plan will move forward after receiving a key approval from the state.
9. Maine Medical Center advances $525M expansion project
Portland-based Maine Medical Center is moving forward with the final phase of its $525 million expansion project, a six-story building with 64 inpatient beds.
10. Mayo Clinic invests nearly $800M to expand in Florida, Arizona
In an effort to meet rising patient demand, Mayo Clinic will invest nearly $800 million to expand its campuses in Arizona and Florida.
11. New York health system gets $180M loan for $480M expansion
Utica, N.Y.-based Mohawk Valley Health System secured the last piece of funding to finance its $480 million expansion project.
12. University Health System advances plans for $452M expansion
San Antonio-based University Health System is moving forward with its $452 million hospital expansion, which includes building a 302-bed tower.
13. Essentia Health seeks bonds for $800M campus upgrade
Duluth, Minn.-based Essentia Health is looking to secure $800 million in bonds to fund its campus upgrade.
14. Rural South Carolina hospital fears nearby $325M facility will wipe it out: 5 things to know
The Medical University of South Carolina, based in Charleston, got the greenlight from regulators to build a $325 million hospital in Berkeley County — an approval Orangeburg, S.C.-based Regional Medical Center says will threaten its viability as a rural healthcare provider.
15. JPS Health Network seeks $800M toward $1.2B in campus upgrades
Fort Worth, Texas-based Tarrant County Hospital District, which does business as JPS Health Network, is seeking voter approval for an $800 million bond proposal that would fund more than $1.2 billion in hospital upgrades.
HENRY KOTULA 