Tag Archives: Operating Performance

Cigna latest major payer to post strong Q2

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Dive Brief:

  • Cigna reported strong second-quarter earnings Friday, which included a 4% increase in total revenues compared to a year ago to $10.3 billion.
  • In announcing its earnings, Cigna also raised its 2017 earnings forecastfrom between $9.35 and $9.85 to between $9.75 and $10.05 per share. Experts had predicted $9.77.
  • With Cigna’s announcement, six major health insurers have beaten Wall Street expectations in the second quarter, despite the healthcare debate in Washington and uneasiness in the Affordable Care Act exchanges.

Dive Insight:

Cigna’s positive results are yet another second-quarter success for payers. In recent days, Aetna raised its outlook after a strong quarter, Humana beat its earnings predictions, Anthem posted strong results and UnitedHealth announced that its revenue grew 8% from last year.

For Cigna, the payer’s adjusted income from operations increased to $750 million compared to $515 million last year, which Cigna said “reflects significantly increased earnings contributions from each of our business segments.”

Premiums and fees increased 3% compared to a year ago, which was “driven by customer growth and specialty contributions in our commercial business.” Cigna reported that its financial results for its commercial insurance projects more than offset a drop in revenue from government products because of lower enrollments in those programs.

Cigna’s positive second-quarter numbers may lead to M&A activity, especially regarding Medicare Advantage (MA). Cigna Chief Executive David Cordani said in June the payer has between $7 billion and $14 billion that it may use on mergers and acquisitions this year. That money may go to expanding its MA offerings. Corandi declined to say in June whether Cigna is looking to buy Humana, which is the second-largest MA payer, or whether it may acquire or merge with other companies.

Regardless, you can expect Cigna to grow its MA market in the coming months after the CMS lifted Cigna’s suspension to sell MA and Medicare Part D plans in June. The suspension came after CMS found issues with Cigna’s appeals and grievances processes, Part D, formulary and benefits administration. The CMS restricted Cigna for 18 months, which the company said cost them at least $500 million.

Also, earlier this year, a proposed $54 billion merger proposal with Anthem  failed. Despite the failed merger, Humana reported $1.1 billion net income in the first quarter compared to $254 million last year. At the time, Humana officials pointed to the failed merger with Anthem as a major reason for the net income increase and Bruce D. Broussard, Humana’s president and chief executive officer, especially highlighted MA as a positive.

After the merger failed, Cigna filed a lawsuit against Anthem that seeks more than $13 billion in damages and a $1.85 billion contractual breakup fee. Anthem is protesting both payments.

5 hospitals with strong finances

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http://www.beckershospitalreview.com/finance/5-hospitals-with-strong-finances-080117.html

Here are five hospitals and 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. Hospital and health system names were compiled from recent credit rating reports and are listed in alphabetical order.

1. Coral Gables-based Baptist Health South Florida has an “AA-” rating and stable outlook with S&P. The system maintained key balance sheet metrics and generated better-than-projected financial results in fiscal year 2016, according to S&P.

2. Carolinas HealthCare System has an “Aa3” rating and stable outlook with Moody’s. The Charlotte, N.C.-based system has a track record of good financial performance, strong balance sheet metrics and a large scope of operations with multiple hospitals. Moody’s expects Carolinas HealthCare System to maintain stable leverage metrics while continuing to generate financial results at current levels.

3. Children’s Healthcare of Atlanta has an “Aa2” rating and stable outlook with Moody’s. CHOA is a leading provider of high acuity pediatric care in the Atlanta area and has favorable leverage metrics and a track record of strong margins and liquidity, according to Moody’s.

4. Cleveland Clinic Health System has an “Aa2” rating and stable outlook with Moody’s. The system has a track record of meeting operating challenges to sustain strong cash flow, exceptional fundraising capabilities, strong liquidity and a growing ability to leverage an international brand into revenue diversification, according to Moody’s. The debt rating agency expects Cleveland Clinic to manage execution risks of multiple strategies, as demonstrated in the past.

5. Broomfield, Colo.-based SCL Health has an “AA-” rating and stable outlook with Fitch. The system’s operating performance improved in fiscal year 2015, and SCL has sustained those results, according to Fitch. The system has manageable capital needs in the near term, a stable liquidity position and geographic diversity, with 12 hospitals in five markets across three states.

 

9 recent hospital, health system outlook and credit rating actions

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The following hospital and health system credit rating and outlook changes and affirmations took place in the last week, beginning with the most recent.

1. Fitch assigns ‘A+’ rating to Regional Health’s bonds
Fitch Ratings assigned an “A+” rating to Rapid City, S.D.-based Regional Health’s proposed $214.4 million series 2017 revenue bonds to be issued by the South Dakota Health & Educational Facilities Authority.

2. Moody’s downgrades Midland County Hospital District’s debt rating to ‘Aa3’
Moody’s Investors Service downgraded Midland (Texas) County Hospital District’s general obligation debt rating to “Aa3” from “Aa2,” affecting $101.1 million of general obligation debt.

3. Moody’s assigns ‘Baa3’ rating to SoutheastHealth’s bonds
Moody’s Investors Service assigned its “Baa3” rating to Cape Girardeau, Mo.-based SoutheastHealth’s proposed $86.9 million series 2017A and $6.29 million series 2017B revenue bonds, to be issued through the Industrial Development Authority of the County of Cape Girardeau and the Industrial Development Authority of Stoddard County. The bonds will mature in 2042.

4. Moody’s affirms ‘A1’ rating on Sarasota County Public Hospital District’s bonds
Moody’s Investors Service affirmed its “A1” rating on Sarasota (Fla.) County Public Hospital District’s outstanding bonds, affecting $192 million of debt.

5. S&P revises NorthShore University HealthSystem’s outlook to stable
S&P Global Ratings affirmed the “AA” rating on Evanston, Ill.-based NorthShore University HealthSystem’s series 2010 revenue refunding bonds, issued by the Illinois Finance Authority.

6. S&P upgrades HealthEast Care System’s bond rating to ‘A+’
S&P Global Ratings upgraded the rating to “A+” from “BBB+” on St. Paul, Minn.-based HealthEast Care System’s series 2017A bonds, issued by the Redevelopment Authority of the City of Saint Paul.

7. Moody’s assigns ‘A2′ rating to Fairview Health Services’ bonds
Moody’s Investors Service assigned its “A2” rating to Minneapolis-based Fairview Health Services proposed $197 million series 2017A revenue bonds to be issued through the Housing and Redevelopment Authority of the City of St. Paul, Minn. The bonds will be fixed rate and will mature in 2047.

8. Moody’s assigns ‘A3’ rating to North Valley Hospital’s bonds
Moody’s Investors Service assigned its “A3” to Tonasket, Wash.-based North Valley Hospital’s proposed $8.5 million unlimited tax general obligation refunding bonds. The expected sale date is Aug. 16.

9. Moody’s downgrades Lucile Packard Children’s Hospital’s credit rating
Moody’s Investors Service downgraded Palo Alto, Calif.-based Lucile Packard Children’s Hospital’s credit rating to “A1” from “Aa3.”

Kaiser’s operating income jumps 57% to $772M

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http://www.beckershospitalreview.com/finance/kaiser-s-operating-income-jumps-57-to-772m.html

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Oakland, Calif.-based Kaiser Permanente reported higher revenue and operating income for its nonprofit hospital and health plan units in the second quarter of 2017.

Kaiser saw revenue climb to $18.1 billion in the second quarter of this year. That’s up 14.6 percent from revenue of $15.8 billion in the same period of 2016.

That boost was attributable, in part, to the system’s health plan unit. In the first half of 2017 Kaiser added 1.1 million health plan members. This growth was partially attributable to Kaiser’s acquisition of Seattle-based Group Health Cooperative in February. As of June 30, Kaiser had about 11.7 million members.

Kaiser reported operating income of $772 million in the second quarter of this year, up 57.2 percent from $491 million in the same period of 2016.

After factoring in non-operating income, Kaiser ended the second quarter of 2017 with net income of $1 billion, up from net income of $707 million in the second quarter of the year prior.

What’s the Near-Term Outlook for the Affordable Care Act?

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If Congress abandons efforts to repeal and replace the Affordable Care Act (ACA), President Trump has said he would “let Obamacare fail.” This Q&A examines what could happen if the Affordable Care Act, also called “Obamacare,” remains the law and what it might mean to let Obamacare fail.

Is Obamacare failing?

The Affordable Care Act was a major piece of legislation that affects virtually all payers in the U.S. health system, including Medicaid, Medicare, employer-sponsored insurance, and coverage people buy on their own. One of the biggest changes under the health reform law was the expansion of the Medicaid program, which now covers nearly 75 million people, about 14 million of whom are signed up under the expansion. Most Americans, including most Republicans, believe the Medicaid program is working well.

When people talk about the idea of the ACA failing, they are usually referring to the exchange markets, also called Marketplaces. These markets, which first opened in 2014, are part of the broader individual insurance market where just 5-7% of the U.S. population gets their insurance. People who get insurance from other sources like their work or Medicaid are not directly affected by what happens in the individual insurance market.

The exchange markets have not been without problems: There have been some notable exits by insurance companies and premium increases going into 2017, and in the early years of the exchanges, insurers were losing money. The structure of the ACA’s premium subsidies – which rise along with premiums and cap what consumers have to pay for a benchmark plans a percentage of their income – prevents the market from deteriorating into a “death spiral.” However, premiums could become unaffordable in some parts of the country for people with incomes in excess of 400% of the poverty level, who are ineligible for premium assistance.

Insurer participation in this market has received a great deal of attention, as about 1 in 3 counties – primarily rural areas – have only one insurer on exchange. Rural counties have historically had limited competition even before the ACA, but data now available because of the Affordable Care Act brings the urban/rural divide into sharper focus. On average at the state level, competition in the individual market has been relatively stable – neither improving nor worsening.

Premiums in the reformed individual market started out relatively low and remained low in the first few years – about 12% lower than the Congressional Budget Office had projected as of 2016 –before increasing more rapidly in 2017. Most (83%) of the 12 million people buying their own coverage on the exchange receive subsidies and therefore are not as affected by the premium increases, but many of the approximately 9 million people buying off-exchange may have difficulty affording coverage, despite having higher incomes. As might be expected, after taking into account financial assistance and protections for people with pre-existing conditions, some people ended up paying more and others paying less than they did before the ACA. Our early polling in this market found that people in this market were nearly evenly split between paying more and paying less. About 3 millionpeople who remain uninsured are not eligible for assistance or employer coverage and many of them may be going without coverage due to costs.

Our recent analysis of first quarter 2017 insurer financial results finds that the market is not showing signs of collapse. Rather, insurers are on track to be profitable and the market appears to be stabilizing in the country overall. In other words, those premium increases going into 2017 may have been enough to make the market stable without discouraging too many healthy people from signing up. However, there are still markets – particularly rural ones – that are fragile.

CHS announces hospital sales worth $1.5B in revenue amidst ‘disappointing’ 2nd quarter losses

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System is already knee deep in the planned divestitures of 30 hospitals; additional sales are part of shift to “smaller stronger” portfolio.

In addition to the planned divestitures of 30 hospitals,  struggling Franklin, Tennessee-based Community Health Systems announced during an earnings call Wednesday that they are looking at the additional sale of a group of hospitals that carries a combined $1.5 billion in annual net operating revenue.

CHS has already completed 20 of the 30 other planned sales, with 11 being sold in May and another nine deals having closed as of July 1st. The remaining 10 hospital sales are expected to close by September 30th, CHS said.

CHS’ financial health continued its downward slope, with a net loss of $137 million or $1.22 per diluted share in the second quarter of 2017. Their net operating revenue was down 9.7 percent to $4.1 billion. The company’s operating results for the second quarter reflected a 10.8 percent decrease in total admissions. On a same-store basis, both admission and adjusted admission dropped 2.5 percent year over year from 2016, financial documents showed.

Wayne T. Smith, chairman and chief executive officer of Community Health Systems said their focus is now on shifting to a “smaller, stronger portfolio of assets.”

“Obviously, we are disappointed with our performance during the second quarter. Our financial results reflect weaker than expected volumes, which negatively affected our net revenue and Adjusted EBITDA performance. We are seeing better results in certain areas, and we continue to work on a number of initiatives to drive operational and financial improvements.”

CHS expects $137M net loss in Q2, says divestitures will continue

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http://www.beckershospitalreview.com/finance/chs-expects-137m-net-loss-in-q2-says-divestitures-will-continue.html

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Franklin, Tenn.-based Community Health Systems ended the second quarter of 2017 with a net loss of $137 million, marking the fifth consecutive quarter the company has posted a loss, according to a preliminary earnings statement released Wednesday.

CHS recorded revenues of $4.14 billion in the second quarter of this year, down 9.7 percent from revenues of $4.59 billion in the same period of 2016. The drop was attributable, in part, to lower patient volumes. Total admissions were down 10.8 percent in the second quarter of 2017 compared to the same quarter of last year. On a same-facility basis, admissions were down 2.5 percent year over year.

In addition to a drop in patient volume, CHS said the lower than anticipated results in the second quarter were attributable to higher expenses related to purchased services, medical specialist fees and information systems. The company’s financial results also included one-time expenses related to its hospital divestitures.

The company ended the period with an operating loss of $131 million. That’s compared to the $1.43 billion operating loss CHS reported in the second quarter of 2016, when it recorded a noncash impairment charge of $1.4 billion.

To improve its finances and reduce its nearly $15 billion debt load, CHS put a turnaround plan into place last year. As part of the plan, the company announced earlier this year that it intended to sell off 30 hospitals.

CHS completed the sale of nine hospitals on June 30 and July 1, bringing its total completed divestitures to 20 out of the 30 it intends to sell off. The company said it expects to complete the divestiture of the remaining 10 hospitals by Sept. 30.

In its preliminary earnings release, CHS said it plans to continue to unload more hospitals.

“In addition to the previously announced divestiture of 30 hospitals, the company continues to receive interest from acquirers for certain of its hospitals. The company is pursuing this interest for sale transactions involving hospitals with a combined total of at least $1.5 billion in annual net revenue and combined mid-single digit adjusted EBITDA margins,” CHS said.

CHS will release its formal numbers for the second quarter and the first half of 2017 on Aug. 1.

29 hospital, health system outlook and credit rating actions in July

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Fitch: Failed ACA replacement efforts add to healthcare sector uncertainty

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As ACA repeal and replace efforts stall, significant uncertainty remains surrounding how federal policy will affect nonprofit healthcare organizations, leading to a negative sector outlook for healthcare, according to Fitch Ratings.

The uncertainty and negative outlook comes as the Trump administration looks for ways to weaken the ACA even if the health reform law is not repealed.

Nonprofit hospitals experienced declines in uncompensated care under the ACA because of an increase in healthcare coverage due to Medicaid expansion, rollout of healthcare exchanges and allowing children to stay on their parent’s health insurance plan until age 26.

While repeal efforts cause uncertainty for hospitals, current discussions regarding a bipartisan healthcare bill could be beneficial for nonprofit hospitals. A bipartisan effort could potentially reduce the insurance premium price hikes, according to Fitch.

5 hospitals with strong finances

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http://www.beckershospitalreview.com/finance/5-hospitals-with-strong-finances-080117.html

Here are five hospitals and 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. Hospital and health system names were compiled from recent credit rating reports and are listed in alphabetical order.

1. Coral Gables-based Baptist Health South Florida has an “AA-” rating and stable outlook with S&P. The system maintained key balance sheet metrics and generated better-than-projected financial results in fiscal year 2016, according to S&P.

2. Carolinas HealthCare System has an “Aa3” rating and stable outlook with Moody’s. The Charlotte, N.C.-based system has a track record of good financial performance, strong balance sheet metrics and a large scope of operations with multiple hospitals. Moody’s expects Carolinas HealthCare System to maintain stable leverage metrics while continuing to generate financial results at current levels.

3. Children’s Healthcare of Atlanta has an “Aa2” rating and stable outlook with Moody’s. CHOA is a leading provider of high acuity pediatric care in the Atlanta area and has favorable leverage metrics and a track record of strong margins and liquidity, according to Moody’s.

4. Cleveland Clinic Health System has an “Aa2” rating and stable outlook with Moody’s. The system has a track record of meeting operating challenges to sustain strong cash flow, exceptional fundraising capabilities, strong liquidity and a growing ability to leverage an international brand into revenue diversification, according to Moody’s. The debt rating agency expects Cleveland Clinic to manage execution risks of multiple strategies, as demonstrated in the past.

5. Broomfield, Colo.-based SCL Health has an “AA-” rating and stable outlook with Fitch. The system’s operating performance improved in fiscal year 2015, and SCL has sustained those results, according to Fitch. The system has manageable capital needs in the near term, a stable liquidity position and geographic diversity, with 12 hospitals in five markets across three states.