Becker's Hospital Review

40 CFO / FINANCE Kaiser's net income dips 35% to $653M By Ayla Ellison O akland, Calif.-based Kaiser Permanente re- ported higher revenue for its nonprofit hos- pital and health plan units in the second quarter of 2018, but the system ended the period with lower net income. Kaiser's operating revenue climbed to $19.6 billion in the second quarter of this year. That's up 8 per- cent from revenue of $18.1 billion in the same pe- riod of 2017. The boost was attributable, in part, to the system's health plan unit. In the first half of 2018, Kaiser add- ed 453,000 health plan members. As of June 30, Kaiser had 12.2 million members. Kaiser's expenditures in the second quarter of 2018 included capital spending of $735 million, which includes investments in upgrading and opening new facilities, as well as in technology. In the second quarter of this year, Kaiser opened five new medical offices in California, bringing the system's total num- ber of medical offices nationwide to 689. Kaiser reported operating income of $345 million in the second quarter of this year, down 47 percent from $656 million in the same period of 2017. After factoring in nonoperating income, Kaiser end- ed the second quarter of 2018 with net income of $653 million, down 35 percent from net income of $1 billion in the same period of the year prior. n 6-hospital Verity Health files for bankruptcy By Alyssa Rege E l Segundo, Calif.-based Verity Health, which operates six hospitals in Northern and Southern California and maintains ties to billionaire former surgeon Patrick Soon- Shiong, MD, filed for bankruptcy Aug. 31, Reuters reported. Verity Health CEO Richard Adcock told Reuters he expects the system to remain in bankruptcy protection for at least a few years as it restructures and continues working with potential buyers. The bankruptcy announcement comes on the heels of several deals that left the system with more than $1 billion in pension li- abilities and bond debt. Verity Health reportedly secured a $185 million loan to remain operational. Mr. Adcock added the system has been losing nearly $175 mil- lion per year on a cash flow basis. In July, Verity Health revealed it is examining all strategic op- tions, including a sale, of some or all of its hospitals. Mr. Adcock told Reuters the system has received a number of offers, includ- ing from several large national hospital operators. Dr. Soon-Shiong, who has founded and sold several biotech companies and recently purchased the Los Angeles Times and other newspapers for $500 million, acquired Verity Health's management company in 2017. At the time, he said his goal was to revitalize the health system, which has come to employ 6,000- plus people as of 2017. Mr. Adcock said the health system is re-examining all of its contracts, including the management deal with Dr. Soon- Shiong, Reuters reported. n California health system's bankruptcy challenged by employee union By Ayla Ellison E l Segundo, Calif.-based Verity Health System, the nonprofit operator of six hospitals, filed for bankruptcy pro- tection Aug. 31. e bankruptcy proceed- ings are being challenged by SEIU-UHW, a union representing 2,000 workers at Verity Health hospitals. e hospitals were originally owned by Los Al- tos, Calif.-based Daughters of Charity Health System. e financially troubled system be- gan seeking a buyer for the hospitals in 2014, and Integrity Healthcare, a company created by BlueMountain Capital Management, took overthe facilities in 2015 and renamed them Verity Health System. Billionaire Patrick Soon-Shiong, MD, bought Integrity in July 2017, according to the Los Angeles Times. Dave Regan, president of SEIU-UHW, expressed concern about Verity entering bankruptcy. "When Verity bought these hospitals from Daughters of Charity four years ago, they made promises to these communities that they would not lose access to the care they needed," he said in a press release. "Now it looks like Verity's billionaire owner wants to go back on those commitments." In the bankruptcy filing, Verity seeks court permission to sell the hospitals from any liens and encumbrances. SEIU-UHW contends this shows Verity's "intent to nullify their obligations both to their union collective bar- gaining agreements and the conditions of sale imposed by former Attorney General Kamala Harris when Verity purchased the hospitals." By challenging the bankruptcy filing, SEIU- UHW intends to ensure the hospitals are kept open and continue to meet pension obliga- tions and maintain current services and levels of employment. n

• Cover