TARA BANNOW February 21, 2020 06:00 AM
Things are looking up for Community Health
Systems after the company culled more than 50 hospitals in recent years to pay
down debt. As for the hospitals the company sold, nearly 80% are operating at a
loss, bankrupt or closed.
Of the 49 hospitals divested from 2017 through
2019 that are still open, 38 reported operating losses in their most recent
publicly available CMS cost reports, according to Modern Healthcare Metrics.
Four hospitals have been closed since the sales, and the new owners of six
hospitals declared bankruptcy after the deals. Just 11 of the 53 hospitals sold
in the three-year period report positive margins.
Franklin, Tenn.-based CHS, meanwhile, is slowly
improving its financial position after shedding its weakest links. The
for-profit hospital chain lowered its net loss to stockholders to $675 million
in 2019, from a $788 million loss in 2018. Excluding the 12 hospitals CHS
divested last year, admissions grew 1.3% year-over-year. That's compared with a
0.6% same-store decline in fiscal 2018.
"We have effectively reshaped our
portfolio," CHS CEO Wayne Smith said on an earnings call Thursday morning.
"As we shift more of our focus and resources to these stronger healthcare
systems and markets, we're seeing the results."
Smith said over 80% of CHS' remaining 101
hospitals are in markets with a population of at least 50,000. CHS declined to
comment for this article.
It's difficult to draw sweeping conclusions
about the fate of hospitals that have been sold by CHS—it began to actively
divest hospitals in 2014—because so much of their performance is determined by
the circumstances of where they're located, said John Langenderfer, senior vice
president & managing director of healthcare banking with Huntington Bank.
"Revenue size matters and payer mix matters
to the highest degree, especially if the hospital is too small to provide some
of the higher-end surgeries," he said.
The analysis shows that some hospitals simply
can't be saved, no matter how savvy their operator. Jeremy Johnson, a
shareholder with the law firm Polsinelli who specializes in bankruptcy, has
seen that unfortunate scenario run its course for a number of health systems,
including one in West Virginia that filed for bankruptcy in January.
"There's no potential solution for that
situation," he said. "You can't change the demographics. You can't
change the payer system, the rate of uninsured."
Curae Health, which declared bankruptcy in 2018
after buying three CHS hospitals in Mississippi the previous year, had a vision
of truly solving the rural hospital problem, said Johnson, who served as
counsel for the company. Curae planned to centralize purchasing at the
hospitals and run them more efficiently, he said.
"That was their plan and they just could
not do it," Johnson said. "They couldn't get it done."
A media line for Curae has been disconnected.
The Medical University of South Carolina bought
four struggling CHS hospitals in that state in March 2019. One of them, Springs
Memorial Hospital in Lancaster, reported an eye-popping 141% operating loss
margin as of February 2019, the most recent data publicly available. Carolinas
Hospital System-Marion in Mullins reported a 107% operating loss margin as of
February. The hospital in Florence reported a 67% loss margin at that time, and
another in Chester reported a 64% loss margin.
Despite that, MUSC Health says the markets those
hospitals are in exceeded their budgeted targets in fiscal 2019, spokeswoman
Heather Woolwine wrote in an email. She said the hospitals have migrated to key
MUSC platforms, such as its electronic health record system.
"We are seeing increased utilization of
services in those markets since the purchase, which reinforces our position
that the community well understands that accessing high quality and coordinated
care in their local communities is what's best for patients and their
families," Woolwine said.
PinnacleHealth bought four Pennsylvania
hospitals from CHS in July 2017. That same year, the health system became part
of UPMC. In early 2019, UPMC closed one of those former CHS hospitals and
routed services to its nearby hospital in Lititz, another CHS purchase. Since
2018, the latest year for which data is available, each of the three remaining
hospitals have reported financial losses, a departure from when they were owned
by CHS.
The Lititz hospital reported a 9.6% loss margin
in the fiscal year ended June 2018, compared with margins in excess of 10% in
each of the previous four years, Modern Healthcare Metrics data show.
UPMC Pinnacle CEO Philip Guarneschelli said in a
statement that admissions, emergency department and outpatient visits are all
increasing at that hospital, along with patient satisfaction scores.
The hospital UPMC Pinnacle bought from CHS in
Carlisle also took a turn in 2018, reporting a 6.2% loss margin after reporting
a 5.5% positive margin in 2017 and a 6.1% margin in 2016, Metrics data show. Another CHS purchase, Memorial Hospital
in York, now known as UPMC Memorial, reported a 7.3% negative margin in
the year ended June 2018, after a 0.5% positive margin in 2017
and a 5% margin in 2016.
Since the acquisitions, UPMC Pinnacle has
invested in each hospitals' inpatient and outpatient facilities and services,
including adding UPMC Hillman Cancer Centers in each of the three regions,
Guarneschelli said. Each of the hospitals and their outpatient locations have
been integrated into the health system's EHR system, Epic.
In its 10-county, central Pennsylvania coverage
area, UPMC Pinnacle strives to achieve economies of scale, drive marketplace
innovation, attract talent and keep costs low, Guarneschelli said.
"With the addition of these hospitals, UPMC
Pinnacle spread cost over a larger base of operations and improved our access
to capital—allowing us to fund further innovation and make critical investments
in our system and communities," he said.
Through the end of 2019, CHS completed
divestitures accounting for roughly $2.3 billion in net revenue, generating
about $1 billion in gross proceeds, Smith said on Thursday's call.
CHS expects to complete its divestiture plan by
the middle of this year, generating roughly $300 million in additional gross
proceeds, Smith said.
"As divestiture activity comes to a close,
our full attention now can remain on the markets that will remain with our
organization long term," he said.
No comments:
Post a Comment