http://www.healthcaredive.com/news/why-catholic-health-is-bowing-out-of-the-insurance-field/421923/
Hospital and health system consolidation will continue to build, giving the delivery system a significant makeover during the next decade, according to Health Care 2020: Consolidation, a new report published by the Healthcare Financial Management Association. Over that time, healthcare organizations will be challenged to prove that the changing landscape actually improves value to consumers.
The report is the third in a series of four that comprise an environmental assessment designed to guide healthcare organizations in their strategic planning efforts over the next several years.
One major trend cited by the report is that Independent physician practices are increasingly becoming an endangered species, due principally to the healthcare industry’s accelerating transition from volume to value. Regardless of whether pending mergers are allowed to go forward, the health insurance sector should remain highly consolidated for the near future.
HFMA President and CEO Joseph J. Fifer, FHFMA, CPA, said in a statement that consolidation is a trend that’s here to stay.
http://www.pennlive.com/news/2016/11/nixed_hershey-pinnaclehealth_m.html
PinnacleHealth System and Penn State Milton S. Hershey Medical Center said a marriage made sense for many reasons.
Not the least of which was to gain size and strength needed to fend off megasystems from outside their traditional service area. Those systems, they said, are positioning to siphon away patients needing the most advanced care, thereby eroding revenues needed to support those services in Harrisburg-area counties.
But the Federal Trade Commission opposed the merger on the grounds it would create a local hospital monopoly, and Hershey and Pinnacle subsequently called off their engagement.
Those systems now surround Pinnacle and Hershey. At the same time, health care has entered an era where health systems are forever trying to attract more patients. That often requires expanding their footprint.
“It’s going to be hard for them to maintain what they’re doing as stand-alones,” said David Sarcone, an associate professor of business management and health studies at Dickinson College.
Stephen Foreman, an associate professor of health care administration at Robert Morris University in Pittsburgh said, “I can’t say I think their positions are all that great right now.”
Though there has been a flurry of merger and acquisition activity in recent years, industry experts are unsure whether the merger momentum will continue under President-elect Donald Trump’s administration, according to The New York Times.
Here are five things to know about how M&A activity in the healthcare industry may be affected under the Trump administration.
1. President-elect Trump nominated Sen. Jeff Sessions (R-Ala.) to replace Attorney General Loretta Lynch. While it is unclear how the department will handle antitrust cases under Sen. Sessions, the impact from the change in leadership will not be felt immediately. The outcomes of the two major antitrust cases in the insurance market, the Anthem-Cigna and Aetna-Humana mergers, are expected to be decided before Mr. Trump takes office in January. However, the new administration might still have an impact on the mergers, particularly if either the companies or the government decide to appeal the decision, according to the article.
2. According to the article, there is little expectation the Department of Justice under President-elect Trump would drop the cases if the insurers lost and appealed. However, any agreed upon settlement deal may be less onerous to the insurers involved.
3. There is a chance the federal government’s approach to healthcare mergers may not change, according to the article. “There is a history of bipartisan support for antitrust enforcement in healthcare,” said Leslie Overton, a partner at Alston & Bird and a former DOJ official. “I don’t think we should expect a wholesale shift, based on the change from Democratic to Republican.”
4. The Federal Trade Commission’s position on M&A activity may change even less, according to industry experts interviewed by The New York Times. The independent agency is less subject to the political preferences of the president and of Congress.
5. Industry experts also suggest the possible repeal of the ACA will not impede the increasing M&A activity of the past few years. According to the article, hospitals may feel more pressure to join together if the ACA is repealed due to reduced Medicare and Medicaid payments and increased volumes of uninsured patients.
http://www.healthcaredive.com/news/9-ways-hospitals-can-reduce-debt/430488/
Healthcare reform has had a dramatic impact on hospital reimbursement. While millions of Americans are now insured under the Affordable Care Act, high-deductible health plans can leave patients cash-strapped after expensive episodes of care. Sometimes, patients can’t pay for the services they receive, pushing up bad debt at hospitals. At the same time, hospitals are dealing with lower reimbursements and a shift from inpatient to outpatient care, leaving some with property and beds that are no longer financially productive.
Take Community Health Systems for example. Burdened with $15 billion in debt , the Franklin, TN-based hospital chain sold a four-hospital joint venture and spun off 38 hospitals into a separate entity, Quorum Health Corp., earlier this year. Recently, the system inked deals to sell an additional 17 hospitals.
According to Patrick Pilch, head of BDO Consulting’s healthcare advisory practice, many hospitals and health systems don’t have a complete handle on what their costs of care are and they’re losing money as a result. “Understanding your costs of care as well as your cost of capital is imperative,” he tells Healthcare Dive. “Then align that to a future strategy. That’s where you’re going to pull your way out of debt.”
Hospitals should look at their assets, business plan, market and supply chain and then see how those align with their capital strategy, Pilch says. With interest rates expected to rise, non-investment grade hospitals will have a harder time getting capital. “If you have a lot of capital that’s not performing well, you’re in a bit of a state right now,” he adds.
Here are nine ways hospitals can work on debt:
MultiCare Health System plans to purchase the assets of Rockwood Health System in Spokane from subsidiaries of a Tennessee-based health system.
Financial details of the agreement were not disclosed. The deal, which was announced Thursday, is expected to close in the first quarter of 2017.
This is the fifth partnership/merger/acquisition announced this month as the health care industry in Washington state continues to consolidate.
Rockwood Health System includes Deaconess and Valley Hospitals as well as Rockwood Clinic. Those facilities will become part of the MultiCare system, which includes five hospitals, 15 urgent care centers in the Puget Sound region as well as 11 RediClinics located inside select Rite Aid stores. MultiCare is also in the process of opening seven new urgent care clinics it announced in June. It calls these higher-end clinics Indigo Urgent Care.
The volume of hospital M&A deals has doubled over the past six years, with fewer and fewer community hospitals still going it alone. For the remaining holdouts, they are at an important juncture: Should they continue fighting for independence or join a larger system?
This heavily-debated question is at the core of many board meetings. While the answer is unique to each institution, in either scenario, the community hospital that proactively controls its own destiny — instead of losing that control to market forces — can come out ahead.
Whether the future holds independence or acquisition, here is what leadership needs to know to position their hospitals for future growth.
What does it take to stay independent?
For efficient facilities with ample cash on hand, there’s an understandable allure to remaining independent. After all, the board of directors at a community hospital is typically made up of individuals from the local area who can continue to focus exclusively on addressing the needs of the local community rather than answer to a distant corporate team.
But a lean and high-volume operation today just isn’t a strong enough indicator to choose independence for the long term. Leadership must consider broader questions that take into account a host of internal and external factors:
http://www.healthcaredive.com/news/cvs-health-to-cut-600-corporate-jobs-1/429798/
CVS Health employs more than 240,000 people in the U.S., many of whom work in retail positions or as pharmacists at its 9,600 pharmacies. But with increased competition in the drugstore retail space, CVS Health is starting to let some of those positions go.
Recently, the retailer has been buffeted by the likes of Walgreens, Rite Aid, and Wal-Mart Stores jockeying for sales of medications and health care services. Today’s drugstores compete with doctors and healthcare clinics as well as with retailers like Sephora and Ulta in beauty, and of course, general merchandisers like Target and, increasingly, Amazon, in consumer goods. The retailer may also be wary of the proposed merger between rivals Walgreens and Rite Aid.
An uptick in lower-priced generic pharmacy sales and a decline in store traffic muted CVS Health in its previous quarter. Sales grew 2.1% in Q2, missing analyst expectations for a 2.5% rise and trailing well behind the 4.2% increase that CVS posted in the first quarter of this year. Non-pharmacy same-store sales fell 2.5% in Q2, the company added. The drugstore retailer is due to release its third quarter results next week.
While the Affordable Care Act has expanded some opportunities for drugstore retailers to offer more medical services, the law has also helped lower some healthcare costs, as it was intended to do, which could hit retail sales. CVS also left a lot of money on the table when it ceased sales of tobacco products two years ago.
http://www.healthcaredive.com/news/chs-selling-17-hospitals-in-7-deals/429651/
The divestitures of the 17 hospitals follow a previous announcement of the sale of a four-hospital joint venture and an April deal in which CHS spun off 38 of its hospitals into a separate entity–Quorum Health Corp.
The system has previously indicated it may sell up to 30 of its hospitals in a strategy to streamline its operation to focus on its regional hospital hubs, and that the company might even put itself on the block.
The company has been struggling to bring down its debt of $15 billion, which has also involved the sale of its majority stake in its home health division. CHS has been in trouble since acquiring Health Management Associates in 2014 that owned 23 hospitals and some clinics in Florida.
Just last week, a grim preview of its third quarter earnings resulted in CHS’ common stock dropping from $10.03 at the close of business Wednesday to $5.08 at the close of business Thursday. This week its finalized numbers indicated a third quarter net loss of $79 million compared to a net income of $52 million for the quarter last year.
HENRY KOTULA 