Doctors are generating a lot of revenue for hospitals — much more than those doctors receive in salary, according to a recent survey by physician staffing firm Merritt Hawkins.
Why it matters: It’s easy to see why hospitals view acquiring physician practices as a lucrative opportunity — which hospitals are doing at a rapid pace.
Go deeper: A recent survey by the American Medical Association found that for the first time ever, the U.S. has more physicians who work as employees than those who run their own practice.
Achieving full compliance with rules to make their facilities operational after an earthquake by 2030 could strain ratings for many California acute care hospitals and health systems, S&P Global Ratings said in a new report.
California law requires hospitals to upgrade buildings to reduce their risk of collapse during earthquakes by 2020 and to remain operational after an earthquake occurs by 2030. The 2030 rules include structural and nonstructural components.
S&P said most organizations have met the 2020 seismic compliance deadline, but many will face challenges as they invest in achieving full seismic compliance by 2030.
“As many rated California providers invest in the next round of compliance, they will have ongoing capital expenditures, although for some organizations it will likely be less than the updates leading up to the 2020 deadline,” the ratings agency wrote. “Nevertheless, many will face mandated capital spending that will compete with other strategic priorities, and many will face potential operating challenges related to making nonstructural updates while minimizing patient care disruption.”
S&P — which based its analysis on more than 40 rated California-based acute care hospitals and health systems as of Dec. 31, 2018 — said it believes most of the California hospitals and health systems it rates, especially those with higher ratings, should be able to absorb the capital spending and operating expenses related to achieving full seismic compliance by 2030.
However, full compliance by 2030 could be difficult for providers with lower ratings that already have challenges related to accessing capital at a reasonable cost, said S&P.
“Moreover, the additional potentially prohibitive costs for this next round of compliance needs, combined with ongoing industry pressures, could contribute to some shifting strategies, such as mergers and acquisitions, rebalancing of strategic priorities, and potentially closures for those hospitals without the means to finance the project and absorb increased expenses,” the agency wrote.
Access S&P’s full report here.
Oakland, Calif.-based Kaiser Permanente reported higher revenue and net income for its nonprofit hospital and health plan units in the first quarter of 2019.
Kaiser saw operating revenue increase to $21.3 billion in the first quarter of 2019. That’s up 5.3 percent from operating revenue of $20.3 billion in the first quarter of last year.
The boost was partly attributable to the system’s health plan unit. Kaiser saw health plan membership increase year over year to 12.3 million.
“We are pleased that our membership increased by more than 150,000 members in the first quarter, as more people are choosing Kaiser Permanente for their care and coverage,” Kaiser Executive Vice President and CFO Kathy Lancaster said in a press release. “We normally see our largest membership growth in the first quarter due to the fall open enrollment cycle.”
After factoring in operating expenses, which increased 3 percent year over year, Kaiser reported operating income of $1.5 billion in the first quarter of 2019. That’s up from $1.1 billion in the first quarter of 2018.
“This year-over-year increase in Q1 operating income was significantly impacted by several accounting estimates that were favorable when compared to the same period last year,” Kaiser said.
Kaiser’s nonoperating income, generated largely by returns on investments, was $1.6 billion in the first quarter of this year, up from $334 million in the same period a year earlier.
Under an accounting change that took effect Jan. 1, Kaiser reported unrealized gains on certain equities as net nonoperating income, which added $896 million to the organization’s nonoperating income in the first quarter of this year.
Kaiser reported net income of $3.2 billion in the first quarter of 2019, more than double its net income of $1.4 billion in the first quarter of last year.
Ms. Lancaster said Kaiser’s strong first-quarter performance will allow for more strategic investments in facilities, people and technology. During the first quarter of 2019, Kaiser said it spent $834 million on technology and upgrading and opening new facilities.
The hospital had already transferred out most of its patients and lost half its staff when the CEO called a meeting to take inventory of what was left. Employees crammed into Tina Steele’s office at Fairfax Community Hospital, where the air conditioning was no longer working and the computer software had just been shut off for nonpayment.
“I want to start with good news,” Steele said, and she told them a food bank would make deliveries to the hospital and Dollar General would donate office supplies.
“So how desperate are we?” one employee asked. “How much money do we have in the bank?”
“Somewhere around $12,000,” Steele said.
“And how long will that last us?”
“Under normal circumstances?” Steele asked. She looked down at a chart on her desk and ran calculations in her head. “Probably a few hours,” she said. “Maybe a day at most.”
The staff had been fending off closure hour by hour for the past several months, ever since debt for the 15-bed hospital surpassed $1 million and its outside ownership group entered into bankruptcy, beginning a crisis in Fairfax that is becoming familiar across much of rural America. More than 100 of the country’s remote hospitals have gone broke and then closed in the past decade, turning some of the most impoverished parts of the United States into what experts now call “health-hazard zones,” and Fairfax was on the verge of becoming the latest. The emergency room was down to its final four tanks of oxygen. The nursing staff was out of basic supplies such as snakebite antivenin and strep tests. Hospital employees had not received paychecks for the past 11 weeks and counting.
The only reason the hospital had been able to stay open at all was that about 30 employees continued showing up to work without pay, increasing their hours to fill empty shifts and essentially donating time to the hospital, understanding what was at stake. Some of them had been born or had given birth at Fairfax Community. Several others had been stabilized and treated in the emergency room after heart attacks or accidents. There was no other hospital within 30 miles of two-lane roads and prairie in sprawling Osage County, which meant Fairfax Community was the only lifeline in a part of the country that increasingly needed rescuing.
“If we aren’t open, where do these people go?” asked a physician assistant, thinking about the dozens of patients he treated each month in the ER, including some in critical condition after drug overdoses, falls from horses, oil field disasters or car crashes.
“They’ll go to the cemetery,” another employee said. “If we’re not here, these people don’t have time. They’ll die along with this hospital.”
“We have no supplies,” Steele said. “We have nothing. How much longer can we provide quality care?”
As emergencies rise across rural America, a hospital fights for its lifeAs emergencies rise across rural America, a hospital fights for its life
From reimbursement landscape challenges to dwindling patient volumes, many factors lead hospitals to file for bankruptcy.
Here are 12 hospitals that filed for bankruptcy since Jan. 1, beginning with the most recent:
1. De Queen (Ark.) Medical Center filed for Chapter 11 bankruptcy on April 3. The hospital, owned by an affiliate of Kansas City, Mo.-based EmpowerHMS, entered bankruptcy after facing financial challenges for months. Electricity was temporarily shut off in some parts of the hospital in February due to nonpayment, and the hospital subsequently stopped providing patient care.
2. Prague (Okla.) Community Hospital, owned by an affiliate of EmpowerHMS, entered Chapter 11 bankruptcy on March 21. A judge allowed a new company to take over management of Prague Community Hospital in early March after the hospital experienced payroll issues and lacked funds for supplies.
3. I-70 Community Hospital in Sweet Springs, Mo., filed for Chapter 11 bankruptcy on March 21. The bankruptcy filing came after CMS ended its provider agreement with the hospital, which voluntarily suspended its license for 90 days on Feb. 15. I-70 Community Hospital is owned by an affiliate of EmpowerHMS.
4. Haskell County Community Hospital in Stigler, Okla., filed for Chapter 11 bankruptcy on March 17. The hospital, owned by an affiliate of EmpowerHMS, entered bankruptcy with less than $50,000 in assets and at least $1 million in liabilities.
5. Drumright (Okla.) Regional Hospital, owned by an affiliate of EmpowerHMS, filed for Chapter 11 bankruptcy on March 17. The hospital entered bankruptcy with less than $50,000 in assets and upward of $10 million in estimated liabilities.
6. Oswego (Kan.) Community Hospital entered Chapter 11 bankruptcy on March 17. The bankruptcy filing came after the hospital, owned by an affiliate of EmpowerHMS, abruptly closed Feb. 14.
7. Fairfax (Okla.) Community Hospital, owned by an affiliate of EmpowerHMS, filed for Chapter 11 bankruptcy March 17. The hospital entered bankruptcy with less than $50,000 in assets and at least $1 million in liabilities.
8. Horton (Kan.) Community Hospital entered Chapter 11 bankruptcy March 14, just two days after it closed. In its bankruptcy petition, the hospital said it has less than $50,000 in assets and liabilities of between $1 million and $10 million. Horton Community Hospital is owned by an affiliate of EmpowerHMS.
9. Hillsboro (Kan.) Community Hospital, owned by an affiliate of EmpowerHMS, filed for Chapter 11 bankruptcy on March 13. According to documents filed in the bankruptcy case, the hospital has at least $10 million in assets and at least $10 million in liabilities. The hospital owes more than $334,000 in real estate taxes, making the Marion County (Kan.) Treasurer the unsecured creditor with the largest claim against the hospital.
10. Lauderdale Community Hospital in Ripley, Tenn., filed for Chapter 11 bankruptcy on March 8. The hospital, owned by an affiliate of EmpowerHMS, has faced financial challenges for months, and a federal judge appointed a receiver to oversee the hospital’s finances in February.
11. Washington County Hospital in Plymouth, N.C., entered bankruptcy in February after creditors filed an involuntary Chapter 7 bankruptcy petition. The hospital, owned by an affiliate of EmpowerHMS, missed payroll Feb. 8 and suspended all medical services Feb. 14.
12. Penobscot Valley Hospital, a 25-bed critical access hospital in Lincoln, Maine, filed for Chapter 11 bankruptcy Jan. 29. “We have made tremendous strides over the last three years in bringing our operational costs in line with revenue,” Hospital CEO Crystal Landry said in a press release. “Legacy debt is the issue here, and Chapter 11 allows us to restructure that debt so we can keep our doors open and ensure that our community continues to have a hospital close to home.”
New LifeCare Hospitals, a long-term acute care hospital operator based in Plano, Texas, filed for Chapter 11 bankruptcy protection May 6, according to The Wall Street Journal.
The company, owned mostly by affiliates of Blue Mountain Capital, Monarch Alternative Capital and Twin Haven Special Opportunities Fund, cited declining reimbursement due to Medicare changes as the reason for the bankruptcy filing.
Prior to entering bankruptcy, New LifeCare, which operates 17 facilities in nine states, closed some hospitals and took other steps to cut costs.
New LifeCare is in discussions with potential buyers, and CEO James Murray expects the company to be auctioned through the bankruptcy process later this year, according to The Wall Street Journal, which cited bankruptcy court documents.