Highmark Health posts record 6-month performance with $505M operating surplus

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Pittsburgh-based Highmark Health, the parent company of insurer Highmark and Allegheny Health Network, reported an operating gain of $505 million in the first six months of fiscal year 2017, compared to $35 million the same period last year.

“Highmark Health delivered its strongest financial performance for the six-month period ending June 30 since the formation of Highmark in 1996,” Karen Hanlon, executive vice president and CFO of Highmark, said.

Highmark attributed its financial turnaround to improvements in its government health plan business, as well as its commercial and senior health plan segments. The company’s nealry 5 million-member health plan achieved an operating gain of $480 million in the six months ended June 30, up $399 million compared to the same period a year prior, mostly fueled by its government business.

On the provider side, Highmark’s Allegheny Health Network in Pittsburgh saw its strongest financial performance since its establishment. AHN recorded $28 million in excess revenue over expenses in the first six months of this year, an improvement of $47 million from the same period in 2016.

While intentional enrollment reductions decreased Highmark’s operating revenues year-over year by $100 million to $9.1 billion in the six-month period, at the same time the organization’s expenses dropped $50 million. Highmark attributed the decrease to reduced costs related to its Epic EHR and other technology implementations.

Moody’s: Nonprofit healthcare medians reversed trajectory in FY 2016

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Annual expense growth for nonprofit and public healthcare organizations outpaced annual revenue growth in fiscal year 2016, according to Moody’s Investors Service.

After years of cost containment, annual expense growth hit 7.2 percent in fiscal year 2016, which outpaced annual revenue growth of 6 percent. The expenses were fueled by several factors, including rising pension contributions and higher labor and pharmaceutical costs, according to Moody’s.

“Higher expenses coupled with positive, albeit slower, revenue growth, contributed to lower profitability, tempered liquidity growth, and moderation of nearly all financial metrics,” said Beth Wexler, a Moody’s vice president.

Ms. Wexler said total admissions at nonprofit and public hospitals grew in fiscal year 2016, but the growth rate slowed due to stabilization of the uninsured population.

The medians are based on an analysis of audited fiscal year 2016 financial statements for 323 freestanding hospitals, single-state health systems and multi-state healthcare systems, representing 81 percent of all Moody’s rated healthcare entities.

For-profit hospital operators likely to experience weak patient admissions through 2018

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Major for-profit hospital operators were plagued by weak patient volumes in the quarter that ended June 30, and this trend is likely to continue through next year, according to Reuters.

Dallas-based Tenet Healthcare’s net loss ballooned from $44 million in the second quarter of 2016 to $56 million in the second quarter of this year. The company’s hospitals experienced softer patient volume in the second quarter of 2017, including fewer patients seeking elective procedures, according to Reuters.

Tenet’s rivals, such as Nashville, Tenn.-based HCA Healthcare and Franklin, Tenn.-based Community Health Systems also experienced weak patient volumes in the second quarter. HCA ended the second quarter of 2017 with net income of $657 million, which was down slightly from $658 million in the same period of 2016. CHS recorded a net loss of $137 million in the second quarter of this year, compared to a net loss of $1.43 billion in the same period of 2016.

Tenet, HCA, CHS and other for-profit hospital operators experienced a surge in admissions in 2014 and 2015 due to higher insured rates under the ACA. However, many insurers have pulled back from the ACA exchanges since last year, which has caused the for-profit hospital operators to see lower patient volumes, analysts told Reuters.

The companies are expected to see weak patient admissions next year, as the future of the ACA remains uncertain and patients with high-deductible health plans face soaring out-of-pocket costs.

Presence Health to join Ascension

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St. Louis-based Ascension, the nation’s largest nonprofit Catholic health system, signed a nonbinding letter of intent to acquire Chicago-based Presence Health, Illinois’ largest Catholic health system.

Under the deal, Presence’s medical centers, outpatient facilities and other care sites would be operated by Amita Health, a joint venture created by Ascension’s Arlington Heights-based Alexian Brothers Health System and Hinsdale, Ill.-based Adventist Midwest Health, part of Altamonte Springs, Fla.-based Adventist Health System. Ascension would own the facilities.

Presence Life Connections’ skilled nursing and assisted and independent living facilities would join Ascension Living, Ascension’s senior care subsidiary, the companies said in a news release.

“The mission, values and history of Presence Health clearly align well with those of Ascension, as both systems are dedicated to caring for all, with special attention to persons living in poverty and those most vulnerable,” Ascension President and CEO Anthony Tersigni, EdD, said in the release. “We believe this will strengthen Catholic healthcare not only in the region but throughout the country as we are all dedicated to delivering personalized, compassionate care.”

Mark Frey, president and CEO of Amita and senior vice president of St. Louis-based Ascension Healthcare, a division of Ascension, also expressed excitement about the proposed transaction.

“Since we brought together Alexian Brothers Health System and Adventist Midwest Health to form Amita Health two years ago, we’ve always looked for opportunities to add like-minded partners with similar values to our system,” he said. “Bringing Presence Health into Ascension and AMITA Health is a perfect fit and an exciting continuation of our commitment to increase access to quality healthcare in the many communities we serve.”

Presence President and CEO Michael Englehart echoed these sentiments, saying his system “look[s] forward to working together to engage in this joint effort to expand, and continue to deliver, quality care for our patients and residents, as well as provide additional clinical opportunities and patient care resources to all our physicians and associates.”

The systems said a definitive agreement is expected in the future “pending detailed legal and financial due diligence, along with regulatory and canonical approval.” The deal, if completed, would add 10 Presence hospitals to Ascension and Amita, increasing Ascension’s hospitals to 151. Peoria, Ill.-based OSF HealthCare earlier this month announced plans to own the other two Presence hospitals — Presence Covenant Medical Center in Urbana, Ill., and Presence United Samaritans Medical Center in Danville, Ill.

Terms of the proposed deal were not disclosed.