Temple University Health loses top execs amid restructuring

https://www.beckershospitalreview.com/hospital-management-administration/temple-university-health-loses-top-execs-amid-restructuring.html

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Philadelphia-based Temple University Health System President and CEO Larry Kaiser, MD, confirmed in a letter to colleagues that two top executives plan to depart and their roles will be eliminated, The Inquirer reports.

The Jan. 23 letter, obtained by The Inquirer, states that the health system’s CMO Susan Freeman, MD, and Chief Administrative Officer Alan Rosenberg, are departing and their roles will be eliminated.

Dr. Kaiser, who also serves as dean of the affiliated Lewis Katz School of Medicine, wrote in the letter that Philadelphia-based Temple University Hospital CEO Verdi DiSesa, MD, and its CMO will also step down from their positions. He did not specify what the individuals’ new roles would be.

“I ask that all of you work with me and the leadership team as we move forward with our ongoing restructuring that will allow us to continue to provide superb clinical care for the population we serve and an outstanding education for our students,” Dr. Kaiser wrote in the letter.

Temple University Health System is working with a chief restructuring officer to become more financially sustainable. For the three months ended Sept. 30, 2018, the system reported a net loss of $11.63 million.

To access the full report, click here.

 

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

https://www.healthcaredive.com/news/chs-sees-massive-q3-net-loss-amid-weak-volume-aftershocks-of-hma-settlemen/540868/

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.

 

 

HOSPITALS SHOULD BE BRACING FOR SITE-NEUTRAL PAYMENTS

https://www.healthleadersmedia.com/finance/hospitals-should-be-bracing-site-neutral-payments

Even if the Trump administration were to delay its proposed site-neutral payments policy for outpatient facilities another year or longer, the political debate isn’t going away.


KEY TAKEAWAYS

Prominent hospital groups have said the rule, as proposed, would be illegal.

Lawmakers from both sides of the aisle in both chambers of Congress have voiced opposition.

Hospitals should do their long-term budgeting and strategizing with site-neutrality in mind.

A controversial proposal to cut reimbursement rates for hospital outpatient departments could be finalized this week if the Centers for Medicare & Medicaid Services hits its target date to publish the final rule.

The proposed change to the Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System unveiled last July has drawn criticism from the American Hospital Association (AHA), America’s Essential Hospitals (AEH), lawmakers in both houses of Congress, and others who contend the so-called “site-neutral” payment policies fail to account for the added burden hospital-owned facilities shoulder.

Both AHA and AEH said in formal comments last month that the OPPS/ASC proposal for 2019 appears to be illegal. And lawmakers raised related concerns in two separate letters to CMS Administrator Seema Verma, suggesting the proposal flouts congressional intent.

A bipartisan group of 48 senators signed a letter last month urging CMS to rethink its approach, and a bipartisan group of 138 representatives followed suit this month with a letter of their own.

The political pressure could very well leave an imprint on the final version of the rule, which has been under review by the Office of Management and Budget since October 10. A spokesperson for CMS told HealthLeaders that the agency would not speculate on the potential outcome of the review process, reiterating the agency’s plan to publish the final version on or about Thursday, November 1.

But even if the Trump administration were to postpone the site-neutral payments policy another year or longer, hospitals should still be preparing for site-neutrality, since this political debate will play itself out over the next several years one way or another, says Greg Hagood, a senior managing director with the financial advisory firm SOLIC Capital.

That preparation for site-neutrality should include an ambulatory strategy with investments in outpatient settings, Hagood said, with a word of caution for hospitals and health systems.

“I think they need to do their budgeting, though, with an eye toward the fact that certain areas that have historically been anchors to the hospital—whether that’s the emergency room, cardiac care, or some of these hospital outpatient departments—are likely to see diminished margins,” he said.

Basing a budget around more-conservative revenue estimates for these service lines could prompt hospitals to rationalize their cost structures or even adjust their infrastructure, such as by reducing their number of clinics or inpatient beds, Hagood said.

Although the concept of site-neutrality “makes a ton of sense” on the surface, there’s also a complex history in how American reimbursement models have evolved over the past few decades, and hospitals provide expensive services that other outpatient facilities often don’t, such as indigent care, Hagood said. Switching to a site-neutral system would have “a very economically disruptive impact on a lot of large health systems,” he added.

The debate gains another layer of intrigue when you consider how any action taken by lawmakers will be perceived by their constituents.

“If you want to make a congressman vulnerable,” Hagood said, “you’ll say he was supportive of a policy that results in a closure of a hospital in your district.”

 

 

As Proton Centers Struggle, A Sign Of A Health Care Bubble?

As Proton Centers Struggle, A Sign Of A Health Care Bubble?

The Maryland Proton Treatment Center chose “Survivor” as the theme for its grand opening in 2016, invoking the reality-TV show’s tropical sets with its own Tiki torches, palm trees and thatched booths piled with pineapples and bananas.

It was the perfect motif for a facility dedicated to fighting cancer. Jeff Probst, host of CBS’ “Survivor,” greeted guests via video from a Fiji beach.

But behind the scenes, the $200 million center’s own survival was less than certain. Insurers were hesitating to cover procedures at the Baltimore facility, affiliated with the University of Maryland Medical Center. The private investors who developed the machine had badly overestimated the number of patients it could attract. Bankers would soon be owed repayment of a $170 million loan.

Only two years after it opened, the center is enduring a painful restructuring with investors poised for huge losses. It has never made money, although it has ample cash to finance operations, said Jason Pappas, its acting CEO since November. Last year it lost more than $1 million, he said.

Volume projections were “north” of the current rate of about 85 patients per day, Pappas said. How far north? “Upper Canada,” he said.

For years, health systems rushed enthusiastically into expensive medical technologies such as proton beam centers, robotic surgery devices and laser scalpels — potential cash cows in the one economic sector that was reliably growing. Developers got easy financing to purchase the latest multimillion-dollar machine, confident of generous reimbursement.

There are now 27 proton beam units in the U.S., up from about half a dozen a decade ago. More than 20 more are either under construction or in development.

But now that employers, insurers and government seem determined to curb growth in health care spending and to combat overcharges and wasteful procedures, such bets are less of a sure thing.

The problem is that the rollicking business of new medical machines often ignored or outpaced the science: Little research has shown that proton beam therapy reduces side effects or improves survival for common cancers compared with much cheaper, traditional treatment.

If the dot-com bubble and the housing bubble marked previous decades, something of a medical-equipment bubble may be showing itself now. And proton beam machines could become the first casualty.

“The biggest problem these guys have is extra capacity. They don’t have enough patients to fill the rooms” at many proton centers, said Dr. Peter Johnstone, who was CEO of a proton facility at Indiana University before it closed in 2014 and has published research on the industry. At that operation, he said, “we began to see that simply having a proton center didn’t mean people would come.”

Sometimes occupying as much space as a Walmart store and costing enough money to build a dozen elementary schools, the facilities zap cancer with beams of subatomic proton particles instead of conventional radiation. The treatment, which can cost $48,000 or more, affects surrounding tissue less than traditional radiation does because its beams stop at a tumor rather than passing through. But evidence is sparse that this matters.

And so, except in cases of childhood cancer or tumors near sensitive organs such as eyes, commercial insurers have largely balked at paying for proton therapy.

“Something that gets you the same clinical outcomes at a higher price is called inefficient,” said Dr. Ezekiel Emanuel, a health policy professor at the University of Pennsylvania and a longtime critic of the proton-center boom. “If investors have tried to make money off the inefficiency, I don’t think we should be upset that they’re losing money on it.”

Investors backing a surge of new facilities starting in 2009 counted on insurers approving proton therapy not just for children, but also for common adult tumors, especially prostate cancer. In many cases, nonprofit health systems such as Maryland’s partnered with for-profit investors seeking high returns.

Companies marketed proton machines under the assumption that advertising, doctors and insurers would ensure steady business involving patients with a wide variety of cancers. But the dollars haven’t flowed in as expected.

Indiana University’s center became the first proton-therapy facility to close following the investment boom, in 2014. An abandoned proton project in Dallas is in bankruptcy court.

California Protons, formerly associated with Scripps Health in San Diego, landed in bankruptcy last year.

A number of others, including Maryland’s, have missed financial targets or are hemorrhaging money, according to industry analysts, financial documents and interviews with executives.

  • The Hampton University Proton Therapy Institute in Virginia has lost money for at least five years in a row, recording an operating loss of $3 million in its most recent fiscal year, financial statements show.
  • The Provision CARES Proton Therapy Center in Knoxville, Tenn., lost $1.7 million last year on revenue of $23 million — $5 million below its revenue target. The center is meeting its debt obligations, said Tom Welch, its president.
  • Centers operated by privately held ProCure in Somerset, N.J., and Oklahoma City have defaulted on debt, according to Loop Capital, an investment bank working on deals for new proton facilities.
  • A facility associated with the Seattle Cancer Care Alliance, a consortium of hospitals, lost $19 million in fiscal 2015 before restructuring its debt, documents show. Patient volume is growing but executives “continue to be disappointed in the slower-than-expected acceptance of proton therapy treatment” by insurers, said Annika Andrews, CEO of SCCA Proton Therapy.
  • A center near Chicago lost tens of millions of dollars before restructuring its finances in a 2013 sale to hospitals now affiliated with Northwestern Medicine, documents filed with state regulators show. The facility is “meeting our budget expectations,” said a Northwestern spokesman.

Representatives from ProCure and the facilities in San Diego and Hampton did not respond to repeated requests for interviews.

“In any industry that’s really an emerging industry, you often have people who enter the business with over-exuberant expectations,” said Scott Warwick, executive director of the National Association for Proton Therapy. “I think maybe that’s what went on with some of the centers. They thought the technology would grow faster than it has.”

In the absence of evidence showing protons produce better outcomes for prostate, lung or breast cancer, “commercial insurers are just not reimbursing” for these more common tumors, said Brandon Henry, a medical device analyst for RBC Capital Markets.

The most expensive type of traditional, cancer-fighting radiation — intensity modulated radiation therapy — costs around $20,000 per treatment, while others cost far less. The government’s Medicare program for seniors covers proton treatment more often than private insurers but is insufficient by itself to recoup the massive investment, analysts said.

The rebellion by private insurers “is very, very good” and may signal the health system “is finally figuring out how to say no to low-value procedures,” said Amitabh Chandra, a Harvard health policy professor who has called proton facilities unaffordable “Death Stars.”

Proton centers are fighting back, enlisting patients, legislators and nonprofits to push for reimbursement. Oklahoma has passed and Virginia has considered legislation to effectively require insurers to cover proton therapy in more cases.

An entire day at the 2017 National Proton Conference in Orlando was dedicated to tips on getting paid, including a session titled “Strategies for Engaging Health Insurance on Proton Therapy Coverage.”

Proton facilities tell patients the therapy is appropriate for many kinds of cancer, never mentioning the cost and guiding them through complicated appeals to reverse coverage denials. The Alliance for Proton Therapy Access, an industry group, has online software for generating letters to the editor demanding coverage.

In hopes of navigating a difficult market, many new centers are smaller — with one or two treatment rooms — and not as expensive as the previous generation of units, which typically have four or five rooms, like the Baltimore facility, and cost $200 million or more.

Location is also critical. Treatment requires near-daily visits for more than a month, which may explain why larger centers such as Maryland’s never attracted the out-of-town business they needed.

To make the finances work, hospitals are combining forces. The first proton beam center in New York City is under construction, a joint project of Memorial Sloan Kettering, Mount Sinai and Montefiore Health System.

Smaller facilities, which can cost less than $50 million, should be able to keep their rooms full in many major metro areas, said Prakash Ramani, a senior vice president at Loop Capital, which is helping develop such projects in Alabama, Florida and elsewhere.

Maryland’s center hopes to break even by year’s end, executives said. That will involve refinancing, converting to nonprofit, inflicting losses on investors and issuing municipal bonds.

But plans call for four centers soon to be open in the D.C. area.

“It’s a real arms race,” said Johnstone, the former proton-center CEO, who has co-authored papers on proton-therapy economics. He is now vice chair of radiation oncology at Moffitt Cancer Center in Tampa, which doesn’t have a proton center. “What places need now are patients — a huge supply of patients.”

 

 

Banner aims to save $65M with voluntary employee termination program

http://www.beckershospitalreview.com/finance/banner-aims-to-save-65m-with-voluntary-employee-termination-program.html

OR Efficiencies

Phoenix-based Banner Health is hoping to achieve $65 million in savings this year by allowing certain employees to end their employment early in exchange for continued pay and benefits for a period of time, according to the Phoenix Business Journal.

According to an email Banner sent to employees that Phoenix Business Journal obtained, eligible employees are allowed to apply for the voluntary program. Employees whose applications are approved by Banner will leave the organization between mid-April and June 1, according to the report.

Banner sent emails to employees across the organization who are eligible for the program. Jennifer Ruble, senior director of public relations at Banner, told the Phoenix Business Journal that Banner does not have a set participation target for the voluntary program.

Banner is in the process of restructuring operations. The health system first announced its restructuring efforts in February. That same month, Banner eliminated some leadership positions. The system issued a second round of layoffs this month and told “a small number” of physicians their positions are being eliminated.