Tag Archives: Operating Performance

9 hospitals with strong finances

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

1. Wausau, Wis.-based Aspirus has an “AA-” rating and stable outlook with S&P. The health system has solid debt and liquidity metrics, according to S&P.

2. Charlotte, N.C.-based Atrium Health has an “AA-” rating and stable outlook with S&P. The health system has a strong operating profile, favorable payer mix, healthy financial performance and sustained volume growth, according to S&P.

3. St. Louis-based Mercy Health has an “Aa3” rating and stable outlook with Moody’s. The health system has favorable cash flow metrics, a solid strategic growth plan, a broad service area and improving operating margins, according to Moody’s.

4. Traverse City, Mich.-based Munson Healthcare has an “AA-” rating and positive outlook with Fitch. The health system has a leading market share in a favorable demographic area and a healthy net leverage position, according to Fitch.

5. Parkview Regional Medical Center in Fort Wayne, Ind., has an “AA-” rating and stable outlook with S&P. The hospital is executing on its strategic plan, and S&P expects it to maintain its balance sheet metrics.

6. Vancouver, Wash.-based PeaceHealth has an “AA-” rating and stable outlook with Fitch. The health system has a leading market position, robust reserves and strong cash flow, according to Fitch.

7. Baltimore-based Johns Hopkins Health System has an “Aa2” rating and stable outlook with Moody’s. The health system has favorable liquidity metrics, strong fundraising capabilities, a healthy market position and regional brand recognition, according to Moody’s.

8. Madison-based University of Wisconsin Hospital and Clinics has an “Aa3” rating and stable outlook with Moody’s. The hospital has an integral relationship with the University of Wisconsin-Madison and is a major academic medical center and quaternary referral center for the region and state, according to Moody’s.

9. Willis-Knighton Medical Center in Shreveport, La., has an “AA-” rating and positive outlook with Fitch. The hospital has a leading inpatient market share, favorable payer mix and healthy operating margins, according to Fitch.

 

Anthem’s Q3 profit jumps 29% to $960M

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Anthem posted strong operating results in the third quarter of 2018.

Here are four things to know from the health insurer’s results:

1. Anthem’s operating revenue grew 4 percent in the third quarter of this year to $23 billion, up from $22.1 billion in the same period a year prior. The health insurer said premium increases and the return of the health insurance tax in 2018 positively affected operating revenue, as did growth in its Medicare business.

2. Anthem’s reduced footprint in the individual ACA exchanges, local group and Medicaid plans contributed to a year-over-year decline in membership in the third quarter of this year compared to the same three months in 2017. Anthem lost 753,000 members year over year and now has 39.5 million members. At the same time, Anthem grew its Medicare membership year over year by 267,000 members in the third quarter of this year through acquisitions and organic growth.

3. Anthem trimmed its medical loss ratio, or the amount the health insurer pays toward medical care versus overhead costs, to 84.8 percent in the third quarter of this year. That’s down from 87 percent in the same period last year. Lower taxes and better medical cost performance in its commercial and specialty insurance lines contributed to the improvement.

4. Including expenses and nonoperating gains, Anthem ended the third quarter of 2018 with $960 million in net income, up 29 percent from $747 million recorded in the same period last year.

 

CHS sees massive Q3 net loss amid weak volume, aftershocks of HMA settlement

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Credit: Rebecca Pifer / Healthcare Dive, Yahoo Finance data

 

Dive Brief:

  • Community Health Systems reported third quarter net operating revenues of $3.5 billion, a 5.9% decrease compared with $3.7 billion from the same period last year but slightly higher than analyst expectations.
  • In its earnings release after market close Monday, the Franklin, Tennessee-based hospital operator also disclosed a massive shareholder loss in the quarter of $325 million, or $2.88 per diluted share. CHS had a net loss of $110 million, or $0.98 per diluted share, in Q3 2017.
  • Lower volume was partially to blame, as the quarter saw a 12.4% decrease in total admissions and a 12.2% decrease in total adjusted admissions compared with the same period in 2017. The report also pointed the finger at the financial aftershocks of its troubled purchase of Health Management Associates (HMA), along with loss from early extinguishment of debt, restructuring and taxes.

Dive Insight:

CHS, one of the largest publicly traded hospital companies in the U.S., reported its highest operating cash flow since the second quarter of 2015, according to Jefferies. The third quarter figure of $346 million is also significantly higher than the $114 million from the same quarter last year.

Similarly, volume and revenue didn’t tank as heavily on a same-store basis as they did overall. Same-facility admissions decreased just 2.3% (adjusted admissions by 0.8%) compared with a year ago. Net operating revenues actually increased by 3.2% during the quarter compared with last year, beating analyst expectations.

But declining admissions show how hospital operators continue to struggle under the fierce headwinds 2018 has blown their way so far. CHS is clearly not immune, as the 117-hospital system faces ongoing operational challenges, bringing in financial advisers earlier this year to restructure its copious long-term debt.

The 20-state hospital operator continues to deal with the fiscal fallout from its roughly $7.6 billion acquisition of Florida hospital chain HMA in 2014. The Department of Justice accused the 70-facility HMA of violating the Stark Law and the anti-kickback statute for financial gain between 2008 and 2012, activities CHS reportedly was aware of prior to the merger.

Just last month, CHS announced a $262 million settlement agreement ending the DOJ investigation into HMA’s misconduct. However, that liability was adjusted during the third quarter and, taking into account interest, now totals $266 million. The fee will reportedly be paid by the end of this year.

The settlement also slapped an additional $23 million tax bill on the 19,000-bed system under recent changes to the U.S. tax code.

But that’s not the only regulatory brouhaha CHS has dealt with this quarter.

Since August, CHS has been under civil investigation over EHR adoption and compliance. Annual financial filings show that the company received more than $865 million in EHR incentive payments between 2011 and 2017 through the Health Information Technology for Economic and Clinical Health Act, payments that investigators believe may have been overly inflated.

To deal with the burden, CHS has continued its portfolio-pruning strategy into the third quarter (although a recent Morgan Stanley report notes the system has a very high concentration of weak facilities, and those at risk of closing, relative to its peers). 

During 2018 so far, CHS has sold nine hospitals and entered into definitive agreements to divest five more. The earnings report also divulged CHS is pursuing additional sale opportunities involving hospitals with a combined total of at least $2 billion in annual net operating revenues during 2017, taken in tandem with the hospitals already sold.

The ongoing transactions are currently in various stages of negotiation, the report notes, but CHS “continues to receive interest from potential acquirers.”

CHS is cast in a better light when balance sheet adjustment and non-cash expenses are discarded, as well. Adjusted EBITDA was $372 million compared with $331 million for the same period in 2017, representing a 12.4% increase and suggesting the company can still generate cash flow for its owners in a more friendly atmosphere than the one Q3 provided.

But, though Q2 results were a bright spot in an otherwise gloomy year for the massive hospital operator, its shares have lost about 30% of their value since the beginning of the year (compared to the S&P 500’s decline of roughly 0.5%).

Jefferies believes that CHS should improve its balance sheet and drive positive same-store volume growth, along with speeding up divestitures to raise cash to pay down debt, in order to improve its stock performance.

 

 

Softer bookings dampen Cerner’s Q3 growth

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https://www.healthcaredive.com/news/softer-bookings-dampen-cerners-q3-growth/540694/

Dive Brief:

  • Cerner’s new bookings fell short of expectations in the third quarter of 2018, leading to lower than expected revenue for the period. While sales of licensed software grew 43% from a year ago to $1.59 billion, the EHR vendor didn’t match the second quarter’s $1.78 billion.  
  • Third quarter revenue totaled $1.34 billion, up 5% from the same period the prior year.
  • The earnings report comes as Cerner is under fire again for its performance on a Department of Defense contract. According to Politico, independent investigators for the Pentagon gave the company poor marks on its MHS Genesis EHR implementation, calling the system “not effective and not suitable” and “not interoperable.” The low assessment echoes an April DOD report.

Dive Insight:

Cerner attributed the lower-than-expected software bookings to timing and pointed to a strong pipeline of potential business hookups. Technology resales were also somewhat off in the third quarter.

“There isn’t anything that’s forcing clients to go get deals done,” Cerner CFO Marc Naughton said during a Thursday earnings call. “The market is still active. We just didn’t get much of it in Q3.”

Cerner also said it is not yet seeing the full impact of government contracts. Nonetheless, officials called it a strong quarter with solid results.

“We continue to have good contributions from our key growth areas” of population health, revenue cycle management and health IT outsourcing, said Chief Client Officer John Peterzalek, who replaces departing President Zane Burke starting next week.

“As we look at our portfolio and our investment plans, there’s some transformation of our own that we need to do to make sure we’re positioned well for the opportunities in front of us,” said Cerner Chairman and CEO Brent Shafer. “Part of that work is creating an operating model that is really designed to support innovation at scale. We are at scale now and want to continue to scale.”

Meanwhile, Cerner faces fresh competition from commercial health giant UnitedHealth, which is expanding into EHRs with a fully integrated system in 2019. During a recent earnings call, UnitedHealth CEO David Wichmann said the company will launch a “fully individualized, fully portable” EHR early next year leveraged off its Rally mobile wellness platform.

 

 

Universal Health Services Q3 income spikes 22%

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https://www.healthcaredive.com/news/universal-health-services-q3-income-spikes-22/540697/

Dive Brief:

  • Universal Health Services reported net income soared 22% to $171.7 million during the third quarter this year compared to a year ago. Net revenue experienced a 4% bump to $2.65 billion during the same period. 
  • The King of Prussia, Pennsylvania-based hospital chain also said it put $90 million aside for civil matters related to the Department of Justice’s investigation into the company’s behavioral health facilities. Nearly $50 million was added to the fund during the third quarter, the company said Thursday.
  • UHS narrowed its full-year earnings guidance to be between $9.25 and $9.60 per diluted share compared to the previously range of $9.25 to $9.90. The upper range of the guidance was narrowed by 3%.

Dive Insight:

Mizuho analysts said that despite the softness, UHS “handily” beat its earnings expectations, largely driven by the hospital operator’s acute care unit. Both admissions and patients days increased in the company’s acute care facilities by 1.5% and 4.1%, respectively.

The DOJ is investigating whether some UHS facilities submitted false claims related to services allegedly provided at the sites. For Q3, behavior health facilities experienced admissions increases of nearly 5% and patient days barely increased — by 0.6%.

Net income for the first nine months increased nearly 26% to $674.3 million, or $7.16 per diluted share, as compared to $535.8 million, or $5.53 per diluted share, during the previous time period.

During the third quarter, UHS repurchased about 940,000 shares for a total of about $117.9 million. During the first nine months of the year, the company has repurchased 2.1 million shares for a total of $252 million, or about $120 per share.

UHS shares were down slightly to $121.50 for Thursday’s close, about 52 cents lower than Wednesday’s $122.02 close.

Community Health Systems and HCA both report third quarter earnings next week.

 

 

12 recent hospital, health system outlook and credit rating actions

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The following hospital and health system credit rating and outlook changes or affirmations occurred in the last week, beginning with the most recent:

1. S&P assigns ‘AA+’ rating to OhioHealth‘s bonds
S&P Global Ratings assigned its “AA+” long-term rating to Columbus-based OhioHealth’s $125 million series 2018A and $50 million series 2018B. Concurrently, S&P assigned its “AA+/A-1+” dual rating to the health system’s $37.5 million series 2018C and $37.5 million series 2018D.

2. S&P assigns ‘AA-‘ long-term rating to Atrium Health‘s bonds
S&P Global Ratings assigned its “AA-” long-term rating to Charlotte, N.C.-based Atrium Health’s series 2018A-E bonds. Concurrently, S&P affirmed its “AA-” underlying rating on the health system’s existing bonds.

3. S&P revises Mercy Health Services‘ outlook to positive
S&P Global Ratings revised Baltimore-based Mercy Health Services outlook to positive from stable.

4. Fitch assigns ‘BBB+’ issuer rating to ProMedica
Fitch Ratings assigned its “BBB+” issuer default rating to Toledo, Ohio-based ProMedica. Concurrently, Fitch assigned its “BBB+” long term rating to ProMedica’s $300 million series 2018A bonds and $1.15 billion series 2018B taxable bonds.

5. Fitch upgrades St. Francis Healthcare System to ‘AA’
Fitch Ratings upgraded Cape Girardeau, Mo.-based St. Francis Healthcare System’s rating to “AA” from “AA-,” affecting $139.3 million of debt. Concurrently, Fitch assigned the health system its “AA” issuer default rating.

6. S&P downgrades South Georgia Medical Center‘s rating to ‘BBB+,’ assigns negative outlook
S&P Global Ratings downgraded its long-term rating on Valdosta, Ga.-based South Georgia Medical Center’s certificates to “BBB+” from “A-.”

7. Fitch assigns ‘A’ rating to Edward-Elmhurst Healthcare‘s bonds
Fitch Ratings assigned its “A” rating to Naperville, Ill.-based Edward-Elmhurst Healthcare’s series 2018 bonds, affecting about $249.74 million of debt. Concurrently, Fitch affirmed its “A” issuer default and revenue bond ratings.

8. S&P revises PeaceHealth‘s outlook to positive for improved operations
S&P Global Ratings affirmed its “A” long-term and underlying rating on Vancouver, Wash.-based PeaceHealth and assigned its “A” rating to the health system’s series 2018A bonds. Concurrently, the outlook was revised to positive from stable.

9. S&P revises SSM Healthcare‘s outlook to stable
S&P Global Ratings affirmed its “A+” long-term and underlying rating on St. Louis-based SSM Health. Concurrently, the outlook was revised to stable from negative.

10. S&P downgrades Crawford Memorial Hospital‘s rating to ‘BBB’
S&P Global Ratings downgraded Robinson, Ill.-based Crawford Memorial Hospital’s long-term and underlying rating to “BBB” from “A.”

11. S&P downgrades Lexington Medical Center to ‘A’ after error correction
S&P Global Ratings downgraded West Columbia, S.C.-based Lexington Medical Center’s series 2011, 2016 and 2017 revenue bonds to “A” from “A+.

12. S&P assigns ‘AA-‘ rating to Parkview Regional Medical Center
S&P Global Ratings assigned its “AA-” rating to Fort Wayne, Ind.-based Parkview Regional Medical Center’s series 2018 and 2019A bonds, affecting about $162 million of debt.

CHS shares sink to new low

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Shares of Franklin, Tenn.-based Community Health Systems closed Oct. 4 at $2.67, their lowest closing price ever and down 1.1 percent from the day prior.
The hospital chain’s stock price traded as low as $2.62 on Oct. 4 after closing Oct. 3 at $2.70 per share. Over the past year, CHS shares have traded between $2.62 and $7.62.

CHS saw its net loss shrink in the second quarter of 2018 as the company continued to refine its hospital portfolio. The company is using proceeds from the hospital divestitures to pay down its debt load.

 

15 health systems with strong finances

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Here are 15 health systems with strong operational metrics and solid financial positions, according to recent reports from Moody’s Investors Service and Fitch 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. St. Louis-based Ascension has an “Aa2” senior debt rating and stable outlook with Moody’s. The health system has a large diversified portfolio of sizable hospitals and strong liquidity. Moody’s expects Ascension’s margins to improve in fiscal year 2019.

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

3. Atrium Health has an “Aa3” rating and stable outlook with Moody’s. The Charlotte, N.C.-based health system has historically stable operating performance and solid cash-flow metrics, according to Moody’s.

4. Prince Frederick, Md.-based Calvert Health System has an “AA-” rating and stable outlook with Fitch. The system has a leading market share, a favorable payer mix and stable cash flow, according to Fitch.

5. Children’s Healthcare of Atlanta has an “Aa2” rating and stable outlook with Moody’s. The health system has a dominant market position, strong margins and ample liquidity, according to Moody’s.

6. Cleveland Clinic has an “Aa2” rating and stable outlook with Moody’s. Cleveland Clinic has strong brand recognition, exceptional fundraising ability and healthy cash flow, according to Moody’s.

7. Inova Health System has an “Aa2” rating and stable outlook with Moody’s. The Falls Church, Va.-based health system has consistently strong cash-flow margins, a leading market position and a good investment position, according to Moody’s.

8. Philadelphia-based Main Line Health has an “Aa3” rating and stable outlook with Moody’s. The system has a strong market position, healthy balance sheet metrics and a light debt burden, according to Moody’s.

9. Rochester, Minn.-based Mayo Clinic has an “Aa2” rating and stable outlook with Moody’s. Mayo has a strong clinical reputation, favorable fundraising capabilities and a robust balance sheet, according to Moody’s.

10. Dallas-based Methodist Health System has an “Aa3” rating and stable outlook with Moody’s. The health system has a favorable liquidity position, consistent operating results and a growing market population, according to Moody’s.

11. Omaha-based Nebraska Medicine has an “AA-” rating and stable outlook with Fitch. The system has strong operating margins and a light debt burden, according to Fitch.

12. Fort Wayne, Ind.-based Parkview Health System has an “Aa3” rating and stable outlook with Moody’s. The system has healthy debt service coverage, manageable capital spending and improving liquidity metrics, according to Moody’s.

13. Sisters of Charity of Leavenworth (Kan.) Health System, which does business as SCL Health, has an “Aa3” rating and stable outlook with Moody’s. The system has a good market position in a favorable service area, strong operating margins and limited capital spending, according to Moody’s.

14. Hollywood, Fla.-based South Broward Hospital District has an “Aa3” rating and positive outlook with Moody’s. The health system has a dominant market position, robust debt coverage and improving operating margins, according to Moody’s.

15. Chapel Hill-based University of North Carolina Hospitals has an “Aa3” rating and stable outlook with Moody’s. The health system has an excellent market position, strong patient demand and healthy financial performance, according to Moody’s.

 

 

 

Dignity Health’s net income more than doubles

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Dignity Health, a 40-hospital system based in San Francisco, saw its financial position improve in fiscal year 2018 as it booked higher revenue and benefited from a one-time payment related to a transaction that closed earlier this year.

Dignity recorded revenues of $14.2 billion for the year, which ended June 30, compared with revenues of $12.9 billion for fiscal 2017, according to recently released financial documents. 

In fiscal 2017, Dignity and other California healthcare providers struggled with loss of funds from the state’s provider-fee program, which is designed to help hospitals and health systems treat a large number of indigent patients. The program levies a tax on hospitals, and the state then pools funds to receive federal matches for Medicaid dollars. The Medicaid dollars are distributed back to hospitals based on the number of indigent patients they treat.

In November 2016, California’s participation in the provider-fee program was made permanent with the passage of Proposition 52. However, CMS did not approve the first iteration of the program, which covers the period from Jan. 1, 2017, to June 30, 2019, until December 2017. Accordingly, Dignity’s financial statements for fiscal year 2018 include $447 million in provider-fee payments for the most recent fiscal year plus an additional $217 million of catch-up related to fiscal 2017.

Although the provider-fee payments helped improve Dignity’s financial picture, the system said its unpaid Medi-Cal costs totaled $556 million even after the inclusion of the provider-fee and supplemental payments.

After factoring in expenses, which climbed 6 percent year over year, Dignity ended fiscal 2018 with operating income $529.3 million. That’s compared to fiscal 2017, when the system recorded an operating loss of $66.8 million. The system’s net income more than doubled year over year to $932.5 million.  

During fiscal 2018, Dignity’s financial position was boosted by a one-time gain of $120 million related to a deal with Mechanicsburg, Pa.-based Select Medical to combine occupational medicine and urgent care businesses. Under the transaction, which closed in February, Select Medical’s Concentra Group Holdings and Dignity’s U.S. HealthWorks combined.

Daniel Morissette, Dignity Health’s senior executive vice president and CFO, said several of the system’s balance sheet-related financial metrics also improved in fiscal 2018.

“Our balance sheet continued to strengthen, and cash flows were solid, as we remain focused on further enhancing the long term financial viability of our enterprise and honoring our commitments to the many communities and constituents we serve,” he said in a press release.

 

Fitch: Nonprofit hospital balance sheet metrics improve, operating margins don’t

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U.S. nonprofit hospitals continue to struggle with operating margins, but key balance sheet metrics have improved, according to Fitch Ratings.

Fitch’s 2018 hospital median report, based on audited 2017 data, shows operating margins declined for the second consecutive year in every rating category. The 2017 median operating margin was 1.9 percent compared to 2.8 percent in 2016.

But the agency said key balance sheet metrics, such as days cash on hand, cash to debt and leverage, got better and are at all-time highs. For example, the median days cash on hand climbed from 195.5 in 2016 to 213.9 in 2017, and cash to debt increased to 159 percent from 142.8 percent year over year.
“Despite this apparent contradiction — which may be temporary in nature — the clear signal through the noise is that operating margins remain under pressure for the second year in a row, indicating ongoing stress in the sector,” Fitch said.

The agency said the ongoing operating margin struggles are attributable to salary and wage expense pressures, increasing pharmaceutical costs, and the shift from fee-for-service to value-based care.

Fitch finalized rating criteria changes for nonprofit hospitals revenue debt in January, which focus more on balance sheet strength compared to operating profitability. Even with declining operating margins, Fitch said its median rating for nonprofit hospitals remains ‘A.”

But “should operational pressures continue for an extended period of time, even strong balance sheets will begin to come under pressure,” said Fitch Senior Director Kevin Holloran.