Hospital bankruptcies continue to skyrocket: 3 things to know

https://www.beckershospitalreview.com/finance/hospital-bankruptcies-continue-to-skyrocket-3-things-to-know.html?origin=ceoe&utm_source=ceoe

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More than 20 hospitals have filed for Chapter 11 bankruptcy since 2016, according to an Oct. 30 report from the law firm Polsinelli.

The Polsinelli-TrBK Distress Indices Report details how healthcare trends have affected the U.S. economy. Researchers determined that while the economy, specifically Chapter 11 bankruptcies across all industries and the real estate industry, have remained stable during the past several quarters, healthcare exhibited consistently high levels of distress during eight of the last 11 quarters.

To compile the report, researchers use Chapter 11 bankruptcy data as a proxy for measuring financial distress in the overall U.S. economy and breakdowns of distress specifically in real estate and healthcare.

Here are three things to know from the report:

1. Southwestern states have been hit the hardest by healthcare bankruptcy filings. For example, increased competition, insurance payer pressure and overexpansion contributed to Neighbors Legacy Holdings in Houston, a freestanding emergency facility operator with more than 30 facilities, to file for bankruptcy earlier this year.

2. While general Chapter 11 bankruptcies have decreased 53 percent from the 2010 benchmark, healthcare industry distress increased by 305 percent during the same period.

3. The law firm’s Health Care Services Distress Research Index was 405 for the third quarter of 2018, an increase of 65 points from the second quarter of 2018. The third-quarter figures represent a year-over-year increase of 82 points.

To learn more, click here.

A Sense of Alarm as Rural Hospitals Keep Closing

The potential health and economic consequences of a trend associated with states that have turned down Medicaid expansion.

Hospitals are often thought of as the hubs of our health care system. But hospital closings are rising, particularly in some communities.

“Options are dwindling for many rural families, and remote communities are hardest hit,” said Katy Kozhimannil, an associate professor and health researcher at the University of Minnesota.

Beyond the potential health consequences for the people living nearby, hospital closings can exact an economic toll, and are associated with some states’ decisions not to expand Medicaid as part of the Affordable Care Act.

Since 2010, nearly 90 rural hospitals have shut their doors. By one estimate, hundreds of other rural hospitals are at risk of doing so.

In its June report to Congress, the Medicare Payment Advisory Commission found that of the 67 rural hospitals that closed since 2013, about one-third were more than 20 miles from the next closest hospital.

study published last year in Health Affairs by researchers from the University of Minnesota found that over half of rural counties now lack obstetric services. Another study, published in Health Services Research, showed that such closures increase the distance pregnant women must travel for delivery.

And another published earlier this year in JAMA found that higher-risk, preterm births are more likely in counties without obstetric units. (Some hospitals close obstetric units without closing the entire hospital.)

Ms. Kozhimannil, a co-author of all three studies, said, “What’s left are maternity care deserts in some of the most vulnerable communities, putting pregnant women and their babies at risk.

In July, after The New York Times wrote about the struggles of rural hospitals, some doctors responded by noting that rising malpractice premiums had made it, as one put it, “economically infeasible nowadays to practice obstetrics in rural areas.”

Many other types of specialists tend to cluster around hospitals. When a hospital leaves a community, so can many of those specialists. Care for mental health and substance use are among those most likely to be in short supply after rural hospital closures.

The closure of trauma centers has also accelerated since 2001, and disproportionately in rural areas, according to a study in Health Affairs. The resulting increased travel time for trauma cases heightens the risk of adverse outcomes, including death.

Another study found that greater travel time to hospitals is associated with higher mortality rates for coronary artery bypass graft patients.

In many communities, hospitals are among the largest employers. They also draw other businesses to an area, including those within health care and others that support it (like laundry and food services, or construction).

A study in Health Services Research found that when a community loses its only hospital, per capita income falls by about 4 percent, and the unemployment increases by 1.6 percentage points.

Not all closures are problematic. Some are in areas with sufficient hospital capacity. Moreover, in many cases hospitals that close offer relatively poorer quality care than nearby ones that remain open. This forces patients into higher-quality facilities and may offset negative effects associated with the additional distance they must travel.

Perhaps for these reasons, one study published in Health Affairs found no effect of hospital closures on mortality for Medicare patients. Because it focused on older patients, the study may have missed adverse effects on those younger than 65. Nevertheless, the study found that hospital closings were associated with reduced readmission rates, which is regarded as a sign of increased quality. So it seems consolidating services at larger hospitals can sometimes help, not harm, patients.

“There are real trade-offs between consolidating expertise at larger centers versus maintaining access in local communities,” said Karen Joynt Maddox, a cardiologist and health researcher with the Washington University School of Medicine in St. Louis and an author of the study. “The problem is that we don’t have a systematic approach to determine which services are critical to provide locally, and which are best kept at referral centers.”

Many factors can underlie the financial decision to close a hospital. Rural populations are shrinking, and the trend of hospital mergers and acquisitions can contribute to closures as services are consolidated.

Another factor: Over the long term, we are using less hospital care as more services are shifted to outpatient settings and as inpatient care is performed more rapidly. In 1960, an average appendectomy required over six days in the hospital; today one to two days is the norm.

Part of the story is political: the decision by many red states not to take advantage of federal funding to expand Medicaid as part of the Affordable Care Act. Some states cited fiscal concerns for their decisions, but ideological opposition to Obamacare was another factor.

In rural areas, lower incomes and higher rates of uninsured people contribute to higher levels of uncompensated hospital care — meaning many people are unable to pay their hospital bills. Uncompensated care became less of a problem in hospitals in states that expanded Medicaid.

In a Commonwealth Fund Issue Brief, researchers from Northwestern Kellogg School of Management found that hospitals in Medicaid expansion states saved $6.2 billion in uncompensated care, with the largest reductions in states with the highest proportion of low-income and uninsured patients. Consistent with these findings, the vast majority of recent hospital closings have been in states that have not expanded Medicaid.

In every year since 2011, more hospitals have closed than opened. In 2016, for example, 21 hospitals closed, 15 of them in rural communities. This month, another rural hospital in Kansas announced it was closing, and next week people in Kansas, and in some other states, will vote in elections that could decide whether Medicaid is expanded.

Richard Lindrooth, a professor at the University of Colorado School of Public Health, led a study in Health Affairs on the relationship between Medicaid expansion and hospitals’ financial health. Hospitals in nonexpansion states took a financial hit and were far more likely to close. In the continuing battle within some states about whether or not to expand Medicaid, “hospitals’ futures hang in the balance,” he said.

 

 

Community hospitals fight for survival amid ‘precarious’ financial outlook

https://www.beckershospitalreview.com/finance/community-hospitals-fight-for-survival-amid-precarious-financial-outlook.html

 

Many of the struggles facing hospitals and health systems are worse for community hospitals that  often resort to drastic measures to keep their doors open, according to the North Bay Business Journal.

Jan Emerson-Shea, vice president of external affairs for the California Hospital Association, called  the financial situation of most community hospitals “precarious at best,” partially because of low reimbursement rates from government payers, such as those made via her state’s MediCal Medicaid program.

“There’s a host of challenges that all hospitals face, but particularly these small, independent hospitals,” said Ms. Emerson-Shea. “Some of these hospitals file bankruptcy, some shut altogether, some are able to go to local voters, and some affiliate with larger healthcare systems that have the ability to keep them open and provide them access to capital.”

Sonoma (Calif.) Valley Hospital, a 75-bed facility, has been busy this year making moves to stay afloat. his year the hospital  closed its obstetrics unit, finalized an affiliation agreement with the University of California San Francisco Health and transferred ownership of its home healthcare service to Hospice by the Bay, a UCSF affiliate.

“It’s become clear that a community hospital can no longer try to be all things to all people, but must refocus on essential community needs,” said Kelly Mather, president and CEO of Sonoma Valley Hospital. “We’re all facing the same issues.”

 

Arizona hospital rebrands after bankruptcy

https://www.beckershospitalreview.com/finance/arizona-hospital-rebrands-after-bankruptcy.html?origin=cfoe&utm_source=cfoe

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Green Valley (Ariz.) Hospital has emerged from the bankruptcy process with a new owner and a new name, according to the Arizona Daily Star.

Green Valley Hospital entered Chapter 11 bankruptcy in early 2017 and received permission from the bankruptcy court to sell its assets. In January, Lateral GV, part of equity firm Lateral Investment Management, submitted the winning bid for the facility.

In February, the bankruptcy court approved the sale to Lateral GV, and the hospital emerged from bankruptcy in July with a new name: Santa Cruz Valley Regional Hospital.

Although the hospital exited the bankruptcy process, its financial challenges continued. Santa Cruz Valley Regional Hospital laid off 60 employees in July.

The hospital’s financial footing has stabilized over the past few months, and it is now looking to grow its workforce.

“We’re staffed and ready (for the influx in winter population) and look forward to adding more employees back in,” Santa Cruz Valley Regional Hospital CEO Kelly Adams told the Arizona Daily Star.

The hospital may also add more services in the future.

“I talk with patients every day, and they say they’re tired of going to Tucson for their healthcare,” Ms. Adams said. “This encourages us to bring more physicians in and more services.”

 

 

CHS sees net loss narrow to $110M, pursues $2B hospital divestiture plan

https://www.beckershospitalreview.com/finance/chs-sees-net-loss-narrow-to-110m-pursues-2b-hospital-divestiture-plan.html

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Franklin, Tenn.-based Community Health Systems, which operates 119 hospitals, saw its net loss shrink in the second quarter of 2018 as the company continues to refine its hospital portfolio.

CHS said revenues dipped to $3.56 billion in the second quarter of 2018, down 14 percent from $4.14 billion in the same period of the year prior. The decline was largely attributable to CHS operating 24 fewer hospitals in the second quarter of 2018 than in the same period of 2017. On a same-hospital basis, revenues climbed 3.3 percent year over year.

After factoring in operating expenses and one-time charges, CHS ended the second quarter of 2018 with a net loss attributable to stockholders of $110 million. That’s compared to the second quarter of 2017, when the company recorded a net loss of $137 million.

“Our second quarter results reflect progress in our key areas of strategic focus, most notably improvements in same-store operating results, progress on divestitures and successful refinancings,” said CHS Chairman and CEO Wayne T. Smith in an earnings release.

As part of a turnaround plan put into place in 2016, CHS announced plans in 2017 to sell off 30 hospitals. The company completed the divestiture plan Nov. 1. To further reduce its debt, CHS intends to sell another group of hospitals with combined revenues of $2 billion. The company has already made progress toward that goal.

During 2018, CHS has completed seven hospital divestitures and entered into definitive agreements to sell five others. CHS said it continues to receive interest from potential buyers for certain hospitals.

“As we complete additional divestitures this year, we believe our portfolio will become stronger, and more of our resources can be directed to markets where we have the greatest opportunities to drive incremental growth,” Mr. Smith said.

CHS’ long-term debt totaled $13.67 billion as of June 30, a decrease from $13.88 billion as of the end of last year.

 

Just how bleak is the financial outlook for rural hospitals?

https://www.healthcarefinancenews.com/news/just-how-bleak-financial-outlook-rural-hospitals?mkt_tok=eyJpIjoiWm1abU9EWXhZMlppT0dSbSIsInQiOiJtQm1aMUNkVFBZWmNoUlpQMHRkOHBJcHlEMTg1MDRCa2xPR3h0bXJLWDVjSG1pZU5kZmx5ejNDbWFxMTRHVWR4N0FrQzA4cGgzXC9IdlpLMlBHcFBWemhOWTc3SHR0QUJjdXcxcHk2TTRBZFZxTk55Sis5NVJ2TnRyWFpyaHVWcVMifQ%3D%3D

Nearly half are operating with negative margins, according to new research, which says a high rate of uninsured patients is among the reasons.

With healthcare services being concentrated more and more among major health systems and larger providers, rural hospitals are struggling.

A new study from Chartis Group and iVantage Health Analytics sheds light on the scope of the problem. About 41 percent of rural hospitals faced negative operating margins in 2016, the report found.

If those hospitals were located in a state that elected not to expand Medicaid under the Affordable Care Act, those margins were generally worse than those of their peers, suggesting that such expansion had a mitigating effect on financial pressures.

Due to those financial pressures, 80 rural hospitals closed from 2010 to 2016, indicating that the rural health safety net has seen better days.

One of the key factors behind this was a high rate of uninsured patients, and a payer mix heavy on public insurers with lower claims reimbursement rates. More patients are seeking care outside rural areas, which isn’t helping, and many areas see a dearth of employer-sponsored health coverage due to lower employment rates. Many markets are also besieged by a shortage of primary care providers, and tighter payer-negotiated reimbursement rates.

Demographics aren’t helping rural hospitals, either. Patients in rural markets are generally more socioeconomically disadvantaged, with many patients over 65 years old and suffering from multiple health disparities, which lead to higher general healthcare costs.

To make matters worse, there’s a shortage of physicians in rural communities as well, with only about 39.8 physicians per 100,000 people. By contrast, the ratio in non-rural areas is 53.3 physicians per 100,000 people.

All this comes at a time when the shift from fee-for-service payment models to value-based reimbursement is in full swing, putting pressure on all hospitals to reduce costs — which is especially problematic for rural hospitals given that their demographic and staffing challenges have a tendency to drive costs up, not down.

The researchers pointed to the Graves-Loebsack Save Rural Hospital Act as a possible means of mitigating the problem. The bill, introduced by the House in 2015, would create a payment structure whereby 105 percent of “reasonable” costs would be reimbursed; 100 percent of bad debt would be reimbursed; and rural hospitals would be exempt from 2 percent of sequestration of payments.

The authors suggested revisiting the bill, which would also establish the Community Outpatient Hospital Program, a measure aimed at preserving emergency and outpatient care for rural markets. It would also recoup $5.4 billion in lost Medicare reimbursement among rural hospitals over 10 years.

 

 

Shares of CHS continue to slide

https://www.beckershospitalreview.com/finance/shares-of-chs-continue-to-slide.html

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Shares of Franklin, Tenn.-based Community Health Systems closed July 3 at $3.06, their lowest closing price ever and down 2.2 percent from the day prior.

The 119-hospital chain’s stock price traded as low as $2.82 on July 3 after closing July 2 at $3.13 per share. CHS’ shares have lost 34 percent of their value since hitting $4.64 on June 20, according to Seeking Alpha.

CHS’ share price began sinking June 29 after the company priced a new offering of approximately $1.03 billion of senior secured notes after markets closed June 28. The company intends to use the proceeds to pay off about $1.01 billion in outstanding term loans and related expenses.