Major shareholder wants more frequent oversight of Tenet’s board: 5 things to know

https://www.beckershospitalreview.com/finance/major-shareholder-wants-more-frequent-oversight-of-tenet-s-board-4-things-to-know.html

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Glenview Capital Management, which currently owns 17.8 percent of Dallas-based Tenet Healthcare, has submitted a proposal to Tenet that would amend the for-profit hospital operator’s bylaws to allow all shareholders to take action by written consent without a meeting.

Here are five things to know about Glenview’s proposal, which will be voted on at Tenet’s annual meeting.

1. In a letter to Tenet shareholders, Glenview said Tenet has been a “chronically underperforming company for decades,” and shareholders need the ability to take action by written consent.

“Just as a person in worsening health may need more frequent medical attention than a check-up once every 12-18 months, a chronically unhealthy company is likely to return to health quicker and with more certainty if its owners are allowed more frequent board oversight, and this is effectively accomplished through the ability to take action by written consent,” Glenview wrote in the letter to shareholders.

2. In addition to Tenet’s financial underperformance, Glenview said there are several other factors supporting the proposed change, including the board’s slow response to Tenet’s financial and operational challenges.

3. Although Tenet’s board approved amendments to the company’s bylaws in January that allow majority shareholders to request special meetings, Glenview argued shareholders still need action by written consent.

Glenview said the amendment to allow majority shareholders to call special meetings is “wholly impractical, clearly off-market, and sends a dangerous signal that the board may need additional feedback from shareholders to fully appreciate the cultural renaissance for which we mutually strive.”

4. Tenet said it is reviewing Glenview’s proposal. “We will make a recommendation to shareholders in due course,” Tenet said in a statement.

5. Tenet launched a $250 million cost reduction initiative last year, which involves divesting hospitals in non-core markets and cutting 2,000 jobs, or about 2 percent of the company’s workforce. The for-profit hospital operator ended the third quarter of 2017 with a net loss of $367 million on revenues of $4.59 billion. That’s compared to the same period of 2016, when the company recorded a net loss of $8 million on revenues of $4.85 billion.

13 health systems with strong finances

https://www.beckershospitalreview.com/finance/13-health-systems-with-strong-finances-012317.html

 

Here are 13 health systems with strong operational metrics and solid financial positions, according to recent reports from Moody’s Investors Service and S&P Global Ratings.

Note: This is not an exhaustive list. Health system names were compiled from recent credit rating reports and are listed in alphabetical order.

1. Downers Grove, Ill.-based Advocate Health Care has an “Aa2” rating and stable outlook with Moody’s. The health system has a strong market position, healthy liquidity, moderate leverage and good debt metrics, according to Moody’s.

2. Morristown, N.J.-based Atlantic Health System has an “Aa3” rating and stable outlook with Moody’s and an “AA-” rating and stable outlook with S&P. The system has stable operating performance, balance sheet growth and a favorable market position, according to Moody’s.

3. Dallas-based Baylor Scott & White Health has an “Aa3” rating and stable outlook with Moody’s. The health system has strong cash flow margins and a favorable business position as the largest nonprofit health system in Texas, according to Moody’s.

4. Milwaukee-based Children’s Hospital and Health System has an “Aa3” rating and stable outlook with Moody’s. The system has a strong balance sheet and is the dominant provider of tertiary and quaternary pediatric services in southeastern Wisconsin, according to Moody’s.

5. Indianapolis-based Indiana University Health has an “Aa2” rating and stable outlook with Moody’s. The system has healthy margins and a strong market position, according to Moody’s.

6. Rochester, Minn.-based Mayo Clinic has an “Aa2” rating and stable outlook with Moody’s. Mayo has an excellent clinical reputation and diversified revenue across multiple locations, states and types of hospitals, according to Moody’s.

7. Mercy Health in St. Louis, Mo., has an “Aa3” rating and stable outlook with Moody’s and an “AA-” rating and stable outlook with S&P. The health system has solid debt service coverage and strong balance sheet metrics, according to Moody’s.

8. Chicago-based Northwestern Memorial HealthCare has an “Aa2” rating and stable outlook with Moody’s. The system has a prominent and growing market position in the Chicago region, a strong investment position, good margins and manageable leverage, according to Moody’s.

9. San Diego-based Sharp HealthCare has an “Aa3” rating and stable outlook with Moody’s. The system has strong balance sheet measures and a fundamentally stable and strong strategic position, according to Moody’s.

10. Stanford (Calif.) Health Care has an “Aa3” rating and stable outlook with Moody’s. The system has a strong market position as one of two major academic medical centers in the Bay Area, has a reputation for clinical excellence and research, and is in a service area with strong population growth and high wealth levels, according to Moody’s.

11. Iowa City-based University of Iowa Hospitals & Clinics has an “Aa2” rating and stable outlook with Moody’s. The health system has a broad market with growing patient volumes and geographic reach for its high-acuity services. Moody’s expects the health system’s expense control initiatives to continue to gain traction through fiscal year 2018.

12. Philadelphia-based University of Pennsylvania Health System has an “Aa3” rating and stable outlook with Moody’s. The health system has a strong market position, solid operating margins and limited debt burden, according to Moody’s.

13. Yale New Haven (Conn.) Health System has an “Aa3” rating and stable outlook with Moody’s. The system has a leading market position in Connecticut, solid liquidity, moderate capital needs and manageable leverage, according to Moody’s.

California hospital imposes overtime restrictions, hiring freeze to shore up finances

https://www.beckershospitalreview.com/finance/california-hospital-imposes-overtime-restrictions-hiring-freeze-to-shore-up-finances.html

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Ventura (Calif.) County Medical Center implemented a partial hiring freeze, imposed overtime restrictions and renegotiated staff contracts to help offset a projected deficit of at least $8.3 million, reports the VC Star.

Medical center officials attributed the shortfall to lower-than-anticipated patient volumes, a delayed opening of a $305 million, 122-bed tower at the main hospital and missed revenue projections as a result of lower reimbursements from California’s Medicaid program.

In December, hospital leaders froze the hiring process for employees who are not directly involved with patient care and imposed a stricter policy on overtime requests, which requires employees to receive two levels of approval. Additionally, they renegotiated contracts, realigned staffing levels to fit with the lower number of patient admissions and hired an international consultant to analyze billings.

Payroll costs have decreased about $300,000 to $400,000 in each two-week period as a result of the overtime restrictions and renegotiated contracts, according to the report.

“We’re not sitting around waiting for the year to end,” said VCMC CEO Kim Milstein, according to the VC Star. “This is going to level out.”

Ms. Milstein notes that no medical units have been closed and no regular employees have been laid off.

Stanford Health Care’s operating income more than doubles in Q1

https://www.beckershospitalreview.com/finance/stanford-health-care-s-operating-income-more-than-doubles-in-q1.html

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Stanford (Calif.) Health Care saw revenues and operating income rise in the first quarter of fiscal year 2018, which ended Nov. 30, 2017, according to recently released bondholder documents.

The health system reported revenues of $1.16 billion in the first quarter of fiscal year 2018, up from revenues of $1.07 billion in the same period of the year prior. The system’s net patient revenue and premium revenue climbed 6 percent and 12 percent year over year, respectively.

Stanford Health Care kept expenses in check in the first quarter of this fiscal year. The system reported operating expenses of $1.08 billion, up 3.7 percent from the same period a year earlier.

The system ended the first quarter of fiscal year 2018 with operating income of $74.3 million, more than double the operating income of $28 million it reported in the first quarter of fiscal year 2017.

Stanford Health Care is part of Stanford Medicine, which also includes the Stanford University School of Medicine and Stanford Children’s Health.

 

8 health systems with strong finances

https://www.beckershospitalreview.com/finance/8-health-systems-with-strong-finances-122117.html

Here are eight health systems with strong operational metrics and solid financial positions, according to recent reports from Fitch Ratings, Moody’s Investors Service and S&P Global Ratings.

Note: This is not an exhaustive list. Health system names were compiled from recent credit rating reports and are listed in alphabetical order.

1. Lincoln, Neb.-based Bryan Health has an “AA-” rating and stable outlook with Fitch. The system has a strong market position, healthy balance sheet metrics and growing patient volume, according to Fitch.

2. Mercy Health in Cincinnati has an “Aa3” rating and stable outlook with Moody’s and an “AA-” rating and stable outlook with S&P. The health system has solid debt service coverage and strong balance sheet metrics, according to Moody’s.

3. Chicago-based Northwestern Memorial HealthCare has an “Aa2” rating and stable outlook with Moody’s. The system has a prominent and growing market position in the Chicago region, a strong investment position, good margins and manageable leverage, according to Moody’s.

4. San Diego-based Sharp HealthCare has an “Aa3” rating and stable outlook with Moody’s. The system has strong balance sheet measures and a fundamentally stable and strong strategic position, according to Moody’s.

5. Stanford (Calif.) Health Care has an “Aa3” rating and stable outlook with Moody’s. The system has a strong market position as one of two major academic medical centers in the Bay Area, a reputation for clinical excellence and research, and is in a service area with strong population growth and high wealth levels, according to Moody’s.

6. Iowa City-based University of Iowa Hospitals & Clinics has an “Aa2” rating and stable outlook with Moody’s. The health system has a broad market with growing patient volumes and geographic reach for its high-acuity services, according to Moody’s.

7. Philadelphia-based University of Pennsylvania Health System has an “Aa3” rating and stable outlook with Moody’s. The system has a strong and growing market position, good liquidity, and a history of beating budgets and managing capital spending relative to operating performance, according to Moody’s.

8. Yale New Haven (Conn.) Health System has an “Aa3” rating and stable outlook with Moody’s. The system has a leading market position in Connecticut, solid liquidity, moderate capital needs and manageable leverage, according to Moody’s.

Tax bill has major downside for heavily indebted healthcare companies

https://www.beckershospitalreview.com/finance/tax-bill-has-major-downside-for-heavily-indebted-healthcare-companies.html

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The Republicans’ tax overhaul plan, which is expected to become law soon, will cause many healthcare organizations to reassess their debt levels.

The tax bill will limit the tax deduction companies take for the interest they pay on their debt to 30 percent of earnings before interest, taxes, depreciation and amortization. This change will put pressure on healthcare companies with heavy debt loads. In 2022, interest expense deductions would be further reduced, which could cause companies’ tax bills to increase further, according to The Wall Street Journal.

Franklin, Tenn.-based Community Health Systems and Dallas-based Tenet Healthcare, which carry about $14 billion and $15 billion of debt, respectively, could be negatively affected by the tax bill’s limit on interest expense deductions. On Tuesday, Tenet said it expects the change to lower its 2018 earnings forecast, according to the report.

In a report issued earlier this month, Moody’s Investors Service said many speculative-grade companies across several sectors, including healthcare, would be negatively affected if deductibility were limited.

 

Illinois hospitals’ financial struggles likely to continue into 2018

http://www.chicagotribune.com/business/ct-biz-hospital-financial-struggles-20171215-story.html

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he list reads like a who’s who of hospital systems in the Chicago area: Advocate Health Care, Edward-Elmhurst Health, Centegra Health System.

But it’s a list of hospitals systems that cut jobs this year to deal with financial pressures — not a list any hospital is eager to join.

Hospitals in Illinois and across the country faced financial stresses this year and are likely to continue feeling the squeeze into 2018 and beyond, experts say. Those pressures could fuel more cuts, consolidation and changes to patient care and services.

“We have many hospitals doing their best just to survive,” said A.J. Wilhelmi, president and CEO of the Illinois Health and Hospital Association.

Moody’s Investors Service recently downgraded its outlook for not-for-profit health care and public health care nationally from stable to negative, with the expectation that operating cash flow will fall by 2 percent to 4 percent over the next 12-18 months. About three-fourths of Illinois hospitals are not-for-profit.

“(For) almost every hospital and health system we talk to, (financial pressure) is at the top of their list in terms of ongoing issues,” said Michael Evangelides, a principal at Deloitte Consulting.

A number of factors are to blame.

Leaders of Illinois systems say reimbursements from government insurance programs, such as Medicaid and Medicare, don’t cover the full cost of care. And with baby boomers growing older, many hospitals’ Medicare populations are on the rise. It doesn’t help that payments to hospitals from the state were delayed amid Illinois’ recently resolved, two-year budget impasse, Wilhelmi said.

Unpaid medical bills, known as bad debt, are also increasing as more patients find themselves responsible for large deductibles. Payments from private insurers are no longer helping hospitals as much as they once did. Though those payments tend to be higher than reimbursements from Medicare and Medicaid, they’re not growing as fast as they used to, said Daniel Steingart, a vice president at Moody’s.

Growing expenses, such as for drugs and information technology services, also are driving hospitals’ financial woes. And hospitals are spending vast sums on electronic medical record systems and cybersecurity, Steingart said.

Many also expect that the new federal tax bill, passed Wednesday, may further strain hospital budgets in the future. That bill will do away with the penalty for not having health insurance, starting in 2019. Hospital leaders worry that change will lead to more uninsured people who have trouble paying hospital bills and wait until their conditions become dire and complex before seeking care.

With so much going on, it can be tough for hospitals to meet revenue goals.

“You’re talking about a phenomenon taking place across the country,” said Advocate President and CEO Jim Skogsbergh. Advocate announced in May that it planned to make $200 million in cuts after failing to meet revenue targets. In March, Advocate walked away from a planned merger with NorthShore University HealthSystem after a federal judge sided with the Federal Trade Commission, which had challenged the deal. Advocate is now hoping to merge with Wisconsin health care giant Aurora Health Care, although the hospital systems say financial issues aren’t driving the deal.

“Everybody is seeing declining revenues, and margins are being squeezed. It’s a very challenging time,” Skogsbergh said.

Hospitals in Illinois have responded to the pressures in a number of ways, including with job reductions. Advocate laid off about 75 workers in the fall; Centegra announced plans in September to eliminate 131 jobs and outsource another 230; and Edward-Elmhurst laid off 84 employees, eliminating 234 positions in all, mostly by not filling vacant spots.

Hospitals also are changing some of the services they offer patients and delaying technology improvements, said the Illinois hospital association’s Wilhelmi.

Centegra Hospital-Woodstock earlier this year stopped admitting most overnight patients, one of a number of changes meant to save money and increase efficiency. As a result, the system “achieved our goal of keeping much-needed services in our community,” spokeswoman Michelle Green said in a statement.

Many Illinois hospitals have also cut inpatient pediatric services, citing weak demand, and are instead investing in outpatient services.

The challenge is saving money while improving care and patient outcomes, said Evangelides of Deloitte. Hospitals are striving to do both at the same time.

Advocate, for example, opened its AdvocateCare Center in 2016 on the city’s South Side to treat Medicare patients with multiple chronic illnesses and conditions. The clinic offers doctors, pharmacists, physical therapists, social workers and exercise psychologists. It has helped reduce hospital admissions and visits among its patients, said Dr. Lee Sacks, Advocate executive vice president and chief medical officer.

Advocate didn’t open the clinic primarily to help its bottom line. The goal was to improve patient care while also potentially reducing some costs.

But such moves are becoming increasingly important to hospitals.

“It really does impact everyone,” Evangelides said of the financial pressures facing hospitals. “We all have a giant stake in helping and hoping that the systems across the country … can ultimately survive and thrive.”