Nonprofit Hospital Consolidation to Continue in 2019

https://www.healthleadersmedia.com/finance/nonprofit-hospital-consolidation-continue-2019

Despite increased scrutiny from regulators, nonprofit health systems will remain active through mergers and acquisitions this year, according to a new Moody’s report.

The deluge of M&A activity among nonprofit health systems is expected to continue on in 2019, with the potential for some “unconventional relationships,” according to a Moody’s report released Friday morning.

Driven by tight financial conditions challenging the nonprofit hospital business model, as well as the entrance of nontraditional corporate players to healthcare and the potential changes to the ACA, more M&A activity is expected throughout the year.

Moody’s expects nonprofit health systems to engage in partnerships with other hospitals but also seek to align with companies specializing in data analytics or ridesharing services to continue the transition from inpatient care to outpatient care.

Nonprofit health systems are also aiming to increase their footing when negotiating with payers, which involves strategic decisions to diversity service options and increase their geographic reach.

The report cites ProMedica’s acquisition of HCR Manorcare and Tower Health’s purchase of five for-profit acute care hospitals as examples of nonprofit systems taking a short-term credit hit to gain stable long-term positioning for the organization.

Though M&A activity is expected to be widespread and a primary objective for many nonprofit systems, the Moody’s report warned that additional scrutiny from state and federal regulators is on the way.

The requirements put in place on the CHI-Dignity Health merger by California Attorney General Xavier Becerra, along with price increase restrictions imposed by Massachusetts Attorney General Maura Healey on CareGroup and Lahey Health, are cited as examples of the terms health systems should expect to meet.

For-profits will tap into capital markets

The Moody’s report also indicates that for-profit hospitals will delve further into capital markets so long as they remain receptive and buoyed by low interest rates. This approach could lead to lower interest costs and improve liquidity, which would bolster their credit standing.

Jessica Gladstone, Moody’s associate managing director and lead analyst on for-profit hospitals, told HealthLeaders that rising interest rates would a material impact on many for-profit hospitals.

“High cash interest costs relative to earnings are already consuming the majority of cash for many FP hospital companies,” Gladstone said. “For companies with floating rate debt, rising interest rates (depending on the amount of the increase) could leave some FP hospitals with very little free cash flow left to pay down debt or otherwise invest to grow operations.”

Gladstone added that while many of the same headwinds facing for-profit hospitals remain a challenge in 2019, executives can be encouraged by the opportunities ahead to refinance high-cost debt and achieve cost savings.

Several deals are listed as potential opportunities that could benefit for-profit healthcare organizations in 2019 regarding changes to capital structure, interest cost savings, as well as M&A activity:

Additional highlights from the Moody’s report:

  • Expect smaller community and regional nonprofit hospitals to join cooperatives to gain leverage at the negotiating table on supply costs among other price points.
  • Growing investment by private equity firms in physician practices and ambulatory services, will put a pinch on nonprofit systems.
  • The entrance of Amazon, Walmart, and Apple can’t be discounted as another driver of M&A activity in 2019.
  • Vertical mergers like CVS-Aetna and the continued rise of telemedicine will drive patients away from traditional areas of care delivery, like hospitals.
  • Though major changes to the ACA remain unlikely due to the split government in Congress, smaller changes could still make a significant impact.
  • The report cites potential changes to site-neutral payments, Medicare quality-factor penalties, and DSH payment reductions as examples.

 

 

 

 

Illinois hospital moves to suspend services, gives employees 60-day notice of closing

https://www.beckershospitalreview.com/finance/illinois-hospital-moves-to-suspend-services-gives-employees-60-day-notice-of-closing.html

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Citing a staff shortage, Los Angeles-based Pipeline Health announced plans April 9 to suspend services at Westlake Hospital in Melrose Park, Ill. That plan was put on hold after a Cook County Circuit Court judge held that the abrupt closure could have “irreparable harm” to the community, according to the Chicago Sun Times.

In late January, Pipeline acquired Westlake Hospital and two other facilities from Dallas-based Tenet Healthcare. A few weeks after the transaction closed, Pipeline revealed plans to shut down 230-bed Westlake Hospital, citing declining inpatient stays and losses of nearly $2 million a month.

Pipeline said staffing rates have significantly declined in the weeks since it filed the application to close Westlake Hospital.

“Our utmost priority is safety and quality of patient care,” Pipeline Health CEO Jim Edwards said in an April 9 press release. “With declining staffing rates and more attrition expected, a temporary suspension of services is necessary to assure safe and sufficient operations. This action is being taken after considering all alternatives and with the best interest of our patients in mind.”

In addition to announcing the suspension of services, Pipeline also said it gave hospital employees a 60-day notice of closure, which is required by state and federal law.

Pipeline’s plan to immediately suspend services at the hospital was put on hold yesterday evening, when Judge Eve Reilly granted the village of Melrose Park a temporary restraining order to prevent the hospital from closing. The restraining order prevents Pipeline from closing the hospital, cutting services or laying off workers until after the state Health Facilities and Services Review Board considers the application to shut down the hospital on April 30, according to the Chicago Tribune.

The board could postpone the application due a pending lawsuit against Pipeline over the closure, according to the Chicago Tribune.

The village of Melrose Park sued Pipeline in March, alleging Pipeline acquired Westlake Hospital under false pretenses. The lawsuit alleges Pipeline and its owners kept their plans to shut down the hospital secret until after the transaction with Tenet closed to avoid opposition from village leaders and community members.

Pipeline recently filed a motion to dismiss the lawsuit, arguing its application for change of ownership made no promise to keep Westlake Hospital open and that the hospital’s financial troubles were not fully evident at the time the change of ownership was prepared.

“The complete impact of Westlake’s 2018 devastating net operating loss was not known until the year’s end and had not fully occurred in September 2018 when Pipeline submitted its application for change of ownership or even when that application was granted,” Pipeline said in a press release.

Pipeline said Westlake Hospital ended 2018 with a net operating loss of $14 million, and those losses are projected to worsen over time.

 

Ex-hospital exec sues DMC for wrongful discharge, retaliation

https://www.detroitnews.com/story/news/local/michigan/2019/04/01/hospital-exec-sues-dmc-wrongful-discharge-retaliation/3337429002/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202019-04-03%20Healthcare%20Dive%20%5Bissue:20208%5D&utm_term=Healthcare%20Dive

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The former top Detroit Medical Center cardiologist is suing the health system, arguing he was forced out of his job for complaining about alleged fraud at the health system, including unnecessary surgeries billed to Medicare and Medicaid. 

The wrongful discharge and retaliation lawsuit was filed in Detroit U.S. District Court by Dr. Ted Schreiber, who was recruited by the DMC in 2004 and developed a trademarked process to speed life-saving treatment for heart attack patients.  He also was the founding president of the new DMC Heart Hospital that opened with fanfare in 2014.

Schreiber’s accusations are “unsubstantiated,” a DMC spokeswoman said Monday night, and the health system continues to have a “culture of integrity.”

Heart Hospital shares facilities with Harper University Hospital that is poised to be terminated from the federal Medicare program in less than two weeks after failing inspections in October and December. Since Harper and Heart Hospital are considered a single facility by the Centers for Medicare Medicaid Services, both would be barred from the federal health insurance program for the elderly and disabled if Harper fails to pass an unannounced inspection by the April 15 deadline.

Michigan prohibits hospitals barred from receiving Medicare funding from participating in Medicaid, the health insurance program for mostly low-income people that is jointly funded by the state and federal governments. The two programs combined pay for 85 percent of Harper’s inpatient hospital stays, according to Allan Baumgarten, a Minneapolis-based hospital analyst.

The inspections in October and December were prompted by complaints from Schreiber and three other health system cardiologists who said they were forced from their leadership roles in retaliation for complaining about quality of care issues at the DMC. 

Cardiologists Dr. Mahir Elder and Dr. Amir Kaki filed a similar lawsuit last week in Detroit federal court, saying they were forced from leadership posts for complaining to leaders of the DMC about unnecessary surgeries, dirty surgical instruments and other problems. 

In his lawsuit, Schreiber said he brought concerns about physician competency and unnecessary and/or dangerous procedures to DMC peer review meetings in a bid to ensure that they were investigated. But his concerns were ignored by DMC and its for-profit owner, Tenet Healthcare of Dallas, according to Schreiber’s lawsuit.

“(T)he profitability of physicians was being weighed more heavily by DMC and Tenet executives than the physicians’ ability to provide services to patients within the standard of care,” Schreiber alledged in his lawsuit. “This policy resulted in an increase in unnecessary and/or risky procedures conducted by some physicians leading to bad patient outcomes and even patient deaths.”

The DMC continues to argue that Schreiber and the other cardiologists violated the company’s conduct code. The health system’s top priority is delivering “safe, high quality care to the people of Detroit,” said spokeswoman Tonita Cheatham.

“We have a culture of integrity, which means we don’t look the other way, we don’t condone inappropriate behavior of any kind, and we don’t compromise on our priorities,” Cheatham said in a statement.

“That also means we expect physicians to uphold our Standards of Conduct, including treating fellow physicians, nurses and staff members with respect and dignity.  We welcome the opportunity to present the facts underlying the claims made in the complaint.”

In the lawsuit, Schreiber indicated he also complained to Tenet and DMC leaders that some cardiologists were away from the hospital during times they were required to be on-site as members of Cardio Team One’s 24-hour on-call team. He also said he raised concerns about staffing cuts that resulted in poor nursing care for cardiac patients. 

Tenet Healthcare signed a three-year “corporate integrity agreement” as part of a $513 million settlement with the U.S. Department of Justice over allegations of a kick-back scheme involving involving four Tenet hospital subsidiaries in the South, according to Schreiber’s suit. The agreement required Tenet and all of its hospitals to self-report all complaints to the federal Justice Department.

“Senior management, including these Defendants, failed to do so and blatantly allowed legal violations to occur in order to generate more income by cutting medically necessary support and allowing unnecessary medical procedures, among other things,” the former cardiologist executive said in his lawsuit.

Schreiber referred a request for comment on the lawsuit to his attorney, David Ottenwess of Detroit.

“Tenet Healthcare, the current for-profit owner of the DMC, has been continually cited by the federal government for placing profits over people,” Ottenwess said. “Tenet has continued that course with its retaliation against Dr. Schreiber and others at the Heart Hospital who had the courage to question Tenet’s practices of profits over safety.”

 

WINNERS AND LOSERS FROM HEALTHCARE’S Q4 EARNINGS SEASON

https://www.healthleadersmedia.com/finance/winners-and-losers-healthcares-q4-earnings-season

Healthcare companies have reported their earnings from the final quarter of 2018, revealing some success stories and some ongoing struggles.

Earnings season for Q4 2018 has concluded for companies across the healthcare industry, from insurers, for-profit providers, telemedicine companies, and others in between.

Given the challenging market conditions during the final quarter of last year, including the surprise federal ruling that struck down the Affordable Care Act as unconstitutional, many companies reported weaker earnings than they did earlier in 2018.

However, some were buoyed by new intitiatives and product performance that sustained a level of success they intend to carry into 2019.

Below is a list of healthcare’s winners and losers from the 2018 Q4 earnings season:

WINNERS:

UnitedHealth Group

  • The Minnetonka, Minnesota-based insurer led the pack again, ending 2018 on an upswing thanks to Optum’s record-breaking performance.
  • The PBM subsidiary recorded year-end revenues above $100 billion for the first time ever.
  • Based United expects to achieve revenues above $240 billion in 2019.

Centene Corp.

  • 2018 was a strong year for the St. Louis-based insurer, finishing with more than $60.1 billion in revenues.
  • Managed care membership reached 14 million, an increase of 15% year-over-year.
  • Centene’s net earnings for Q4 2018 were $241 million, an increase of $11 million year-over-year.

Anthem Inc.

  • IngenioRX, Anthem’s PBM slated for debut in 2020, is now expected to launch in Q2.
  • The subsidiary is expected to achieve gross annual savings north of $4 billion, including more than 20% returned to shareholders.
  • Anthem added 37,000 medical enrollment members in Q4, and saw its operating gain grow by 30% year-over-year.

 

MIDDLE:

Teladoc

  • The Purchase, New York-based telemedicine company produced revenues of $122 million and saw total visits rise by 70% while net losses fell.
  • The company still has sizable net losses to account for, posting a net loss of nearly $25 million in Q4 and $97.1 million for the full year.
  • Despite some positive financial metrics, Teladoc’s issued a tepid financial guidance for 2019.

CVS-Aetna

  • While we still wait on final federal approval for the megamerger set to drastically change the healthcare landscape, CVS Health posted its earnings report from a difficult Q4.
  • The Aetna merger played a role in rising revenues by 12.5% for CVS in the last quarter of 2018, but it also hampered some crucial metrics.
  • CVS suffered a net loss of $421 million in Q4 2018 and $596 million during the full year.
  • However, CEO Larry Merlo said he believes CVS’ acquisition of Aetna provides the company with “long-term value” in a rapidly transforming market.

Cigna Corp.

  • As with CVS, a megamerger couldn’t save Cigna from a down quarter to wrap up 2018.
  • The Philadelphia-based insurer produced $14.3 billion in total quarterly revenues and $144 million in net income, but failed to meet earnings estimates after closing its deal with Express Scripts.
  • Overall, Cigna capped off 2018 with total adjusted revenues of $48 billion, a 15% year-over-year increase, along with a net income of $3.6 billion.

LOSERS:

Community Health Systems 

  • Amidst lingering divestiture activity, CHS posted a net loss of more than $325 million.
  • CHS recorded a net loss attributable to shareholders of $328 million in Q4 2018, down from a net loss of more than $2 billion during Q4 2017.
  • On one positive note, the the Franklin, Tennessee-based for-profit hospital operator did manage net operating revenues of $3.5 billion, an increase of nearly $400 million year-over-year.

Tenet Healthcare Corp.

  • Tenet experienced a net loss of $5 million in Q4 and saw its full year operating revenues decline 4.5%.
  • The Dallas-based company’s quarterly adjusted EBITDA fell 34.6% year-over-year.
  • CEO Ron Rittenmeyer praised the “significant progress” Tenet made to “create a more efficient, agile enterprise with new leadership.”

Magellan Health

  • Segment profit fell to $16 million in Q4, down 83.8% year-over-year, and only reached $228 million in 2018, a 26.7% drop.
  • Net revenues for 2018 did increase more than 25%, a lone bright spot for Magellan.
  • CEO Barry Smith remains confident despite the significant financial declines over the past year.

 

 

 

 

Tenet’s patient volumes face sustained pressure

https://www.healthcaredive.com/news/tenets-patient-volumes-face-sustained-pressure/549171/

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Dive Brief:

  • Tenet Health reported Monday patient volumes continue to slide for both inpatient and outpatient units for the fourth quarter and full-year. Looking at volumes on a same facility basis, which accounts for the sale of facilities, total admissions declined nearly 3% in the fourth quarter compared to 2017 and fell nearly 2% in 2018 compared to 2017. Still, the hospital operator beat analyst expectations for its fourth quarter revenue and earnings per share.
  • Hospital segment fourth quarter revenue fell nearly 8% to $3.8 billion from 2017 due to hospital sales last year and the California Provider Fee program. The ambulatory segment reported a modest increase in revenue to $554 million. And client losses in the Conifer RCM segment, which Tenet is looking to sell, caused revenue to dip nearly 6% compared with the fourth quarter in 2017.
  • Overall, for the full year, revenue declined nearly 5% from 2017, while net income improved to $111 million compared to a net loss of $704 million in 2017

Dive Insight:

Hospitals throughout the country continue to face a number of headwinds affecting patient volumes, particularly inpatient admissions. But Tenet reported volume declines for nearly every patient measure, including outpatient visits. 

Tenet’s competitor CHS also reported a drop in total admissions for the year, although CHS’ was much steeper.

While analysts with Jefferies said the softening of patient volumes for Tenet was of concern, the company also delivered strong payer-mix growth and increased hospital profit margins, which underscores “(management’s) progress in delivering cost efficiencies,” the investment bank’s analysts wrote in a note.

CEO Ronald Rittenmeyer told investors Tuesday the company is entering 2019 with a renewed sense of urgency around volume growth. Tenet’s chief operating officer will be tasked with improving organic growth at the system’s hospitals, he said.

Rittenmeyer also outlined the priorities for 2019, which include expanding its ambulatory business, adding new physicians and improving operations to win over patient loyalty. He added the company will look to develop its brand image by delivering the “same unified message” in advertising in its markets around the country.

Tenet disclosed it may have found a buyer or partner for its Conifer business, though executives could not offer any specifics. “We have recently entered into exclusivity with one of the parties that has been engaging with us. While there can be no assurance that this negotiation will result in a transaction we are very pleased with this progress,” Rittenmeyer said.

Tenet also released its guidance for 2019. It expects to generate revenue between $18 billion and $18.4 billion while its window for net income is expected to be between $15 million and $115 million.

Rittenmeyer called 2018 “a year of significant change for the company,” and pledged “additional progress in each of our business segments in 2019 in line with our plan to deliver long-term sustainable growth.”

 

 

 

Tenet looks at offshoring more than 1,000 healthcare jobs

https://www.beckershospitalreview.com/workforce/tenet-looks-at-offshoring-more-than-1-000-healthcare-jobs.html?origin=cfoe&utm_source=cfoe

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Dallas-based Tenet Healthcare is looking to offshore roles throughout the organization to enhance efficiency, according to executive chairman and CEO Ronald Rittenmeyer’s Jan. 8 presentation at the J.P. Morgan Healthcare Conference in San Francisco.

Tenet, one of the nation’s major for-profit hospital operators, did not specify what areas of the organization would be affected. However, Mr. Rittenmeyer told The Dallas Morning News that Tenet will “look at aggressively” offshoring jobs “across the whole enterprise,” which includes Conifer Health Solutions, the company’s Frisco, Texas-based healthcare business services subsidiary.

Mr. Rittenmeyer told the publication that Tenet hadn’t determined how many workers would be displaced. He said he expects it will be more than 1,000 but “certainly not 10,000 or 5,000.”

“The number moves around, depending on what we’re looking at,” he added.

Mr. Rittenmeyer said direct patient care employees such as physicians and nurses won’t be affected, but the offshoring could affect employees who manage corporate functions, according to the Morning News.

He told the publication changes will not take place immediately; he expects them to happen over the next 12 to 18 months.

When contacted by Becker’s, Tenet declined to provide more information on the offshoring plans.

But according to the Morning News, Mr. Rittenmeyer expects to release more information at an upcoming employee town hall meeting.

Tenet’s enterprise includes three areas — hospital operations, Conifer and its Addison, Texas-based ambulatory services operation, United Surgical Partners International. A company spokesperson told the Morning News that Tenet’s total North Texas workforce is about 6,150 employees.

 

 

Hahnemann University Hospital, St. Christopher’s to share newly-appointed CEO

https://www.healthcarefinancenews.com/news/hahnemann-university-hospital-st-christophers-share-newly-appointed-ceo?mkt_tok=eyJpIjoiWW1KbFlXUTRPV1V6WlRjeSIsInQiOiJ1VTVCYWtvaUMwRXRLbGd2N1BTSlhLVjYrT0VjdEpVdUlKc0hhaEVYZ3d1UjdORUp3RzkrNWd6Zjl0elwvSkwyMlwvMkxDSjZxN3I0alVzV1ZwbjZ0R0xBU3o4QWZpUlhsdkl0czMxMWY5MUVuV1hpWUxNeDhEXC9rcjg2Y01nYXA5VCJ9

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Hahnemann, St. Christopher’s were recently sold by Tenet Healthcare to American Academic Health System, a newly-formed affiliate of Paladin Health.

The California healthcare firm that owns both Hahnemann University Hospital and St. Christopher’s Hospital for Children has combined leadership of the two well-known Philadelphia institutions under one new chief executive.

Paladin Healthcare created a new affiliate, American Academic Health System, to own and operate Hahnemann and St. Christopher’s. A memo sent to staff this week said that Southern California hospital executive Suzanne Richards took over as CEO for both hospitals Monday,  according to the Philadelphia Inquirer.

Neither of the previous CEOs, Hahnemann interim CEO Anthony Rajkumar or St. Christopher’s leader George Rizzuto, were mentioned in the memo, the report said.

THE IMPACT

Hahnemann University Hospital is a 496-bed academic medical center affiliated with Drexel University School of Medicine. St. Christopher’s staffs more than 220 pediatric experts and offers both general pediatric care and pediatric specialties including cardiology, ear, nose and throat, gastroenterology, oncology and orthopedics, as well as one of only three Level I pediatric trauma centers in Pennsylvania and the only pediatric burn center in the Philadelphia area.

The hospital also touts an expansive primary and specialty care network that reaches into the Philadelphia suburbs and New Jersey.

THE TREND

The Inquirer report said this is one in a line of management changes American Academic has made since it acquired Hahnemann and St. Christopher’s from Tenet Healthcare in September.

In August, St. Christopher’s laid off 45 people in its physician practices and eliminated an unspecified number of positions also in its physician practices, which amounted to roughly 7 percent of the workforce in the hospital’s practices. Quoting a hospital spokesperson, the report said those being laid off were given severance or offered positions at other American Academic Health System facilities.

Paladin Healthcare formed AAHS to own and operate academic medical centers and general acute care hospitals across the country. Paladin currently manages four Southern California general acute care hospitals as well as the 145-year-old teaching hospital Howard University Hospital in Washington, DC.

Tenet netted roughly $170 million from the sale of Hahnemann and St. Christopher’s, comprised of $152.5 million in cash at closing and a promissory note in the amount of $17.5 million.

ON THE RECORD

At the time of publishing, requests for comment made to Hahnemann, St. Christopher’s and American Academic Health on the change in leadership had not been returned.

On the sale of Hahnemann and St Christopher’s to Paladin/American Academic: “Our leadership team has extensive, first-hand experience in operating hospitals in the Philadelphia market and understands the vital role Hahnemann and St. Christopher’s play in the Philadelphia healthcare delivery system,” said Barry Wolfman, president of Paladin Healthcare. “We appreciate Drexel University College of Medicine’s support and look forward to working closely with the entire physician community to continue the longstanding clinical and academic excellence of both hospitals.”

 

 

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.

 

 

Tenet continues hospital sell-off spree with deals in Illinois, Texas

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/tenet-continues-hospital-sell-off-spree-with-deals-in-illinois-texas.html

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Dallas-based Tenet Healthcare divested a Chicago-area hospital and sold its minority interest in four Texas hospitals.

Tenet completed the sale of MacNeal Hospital in Berwyn, Ill., and its local physician practices to Chicago-based Loyola Medicine, which is part of Livonia, Mich.-based Trinity Health. MacNeal Hospital includes 374 acute care beds, a 12-bed rehabilitation unit, a 25-bed inpatient skilled nursing facility and a 68-bed behavioral health program.

“We look forward to serving a greater number of patients through our expanded delivery network, thanks to the resources, providers and value-added care made possible by adding MacNeal Hospital and its physicians to our system,” Larry M. Goldberg, president and CEO of Loyola Medicine and Trinity Health’s Illinois region, said in a statement.

Tenet also announced the completion of several other deals on Feb. 2. The company sold its minority interest in Baylor Scott & White-Centennial in Frisco, Texas, and Baylor Scott & White-Lake Pointe in Rowlett, Texas, to Dallas-based Baylor Scott & White Health. The company transferred its minority interest in Baylor Scott & White-Sunnyvale (Texas) to Texas Health Ventures Group, which is a joint venture between Tenet’s United Surgical Partners International subsidiary and Baylor Scott & White Health. Tenet also sold its minority interest in Baylor Scott & White Medical Center-White Rock in Dallas to Pipeline Health, a hospital management company based in Manhattan Beach, Calif.

Tenet ended the fourth quarter of 2017 with a net loss of $230 million, compared to a net loss of $79 million in the same period of the year prior. To improve its financial position, 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.

Tenet’s hospital divestiture plan is expected to yield more than $1 billion of proceeds. In the first quarter of 2018, Tenet received $550 million of cash proceeds from the divestiture of MacNeal Hospital, the sale of its minority interest in the Texas hospitals and the sale of two hospitals in Philadelphia.

Tenet sees net loss swell to $230M, says $1B hospital divestiture plan is on track

https://www.beckershospitalreview.com/finance/tenet-sees-net-loss-swell-to-230m-says-1b-hospital-divestiture-plan-is-on-track.html

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Dallas-based Tenet Healthcare, which operates 74 hospitals, saw its net loss widen in the fourth quarter of 2017.

The for-profit hospital operator ended the fourth quarter of 2017 with revenues of $5 billion, up from $4.9 billion in the same period of the year prior. On a same-facility basis, patient revenue was up 6.1 percent year over year in the fourth quarter of 2017, with adjusted admissions up 1.3 percent.

After factoring in operating expenses, a $252 million write-down of the company’s deferred tax assets due to the Tax Cuts and Jobs Act, and a $22 million year-over-year increase in noncontrolling interest expense, Tenet reported a net loss of $230 million in the fourth quarter of 2017. That’s compared to the fourth quarter of 2016, when the company posted a $79 million net loss.

To improve its financial position, 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.

Tenet’s hospital divestiture plan is expected to yield more than $1 billion of proceeds. A presentation published with the company’s fourth-quarter financial results said the hospital divestiture plan is on track. Tenet sold its last two Philadelphia hospitals in January, and the company said it expects to complete the divestiture of 368-bed MacNeal Hospital in Berwyn, Ill., in March.

Tenet is also exploring the sale of Conifer Health Solutions, its healthcare business services subsidiary. The company said in December it expects to decide whether to sell Conifer during the first half of 2018.