Becker's Hospital Review

14 CFO / FINANCE CHS sees net loss swell to $325M in Q3 By Ayla Ellison F ranklin, Tenn.-based Community Health Systems, which operates 118 hospitals, saw its net loss grow in the third quarter of 2018. CHS said revenues dipped to $3.45 billion in the third quarter of 2018, down 6 percent from $3.67 billion in the same period of the year pri- or. e decline was partially attributable to CHS operating 15 fewer hospitals in the third quarter of 2018 than in the same period of 2017. On a same-hospital basis, revenues climbed 3.2 percent year over year. CHS said same-hospital admissions decreased 2.3 percent year over year. When adjusted for outpatient activity, admissions were down 0.8 percent in the third quarter of 2018 compared to the same period a year earlier. Aer factoring in operating expenses and one-time charges, CHS ended the third quarter of 2018 with a net loss attributable to stock- holders of $325 million. at's compared to the third quarter of 2017, when the company recorded a net loss of $110 million. "We are pleased with the progress we made in the third quarter, and we are encouraged by the momentum we are seeing from strategic and operational initiatives that have been implemented across our port- folio of hospitals," CHS Chairman and CEO Wayne T. Smith said in an earnings release. "We are especially pleased with same-store per- formance in many of our core markets." As part of a turnaround plan put into place in 2016, CHS announced plans in 2017 to sell off 30 hospitals. e company completed the di- vestiture plan Nov. 1, 2017. To further reduce its debt, CHS intends to sell another group of hospitals with combined revenues of $2 bil- lion. e company has already made progress toward that goal. During 2018, CHS has completed nine hospital divestitures and en- tered into definitive agreements to sell five others. "We believe our overall performance will continue to improve as we complete additional divestitures and direct our investments into markets where we have the greatest opportunities for growth," Mr. Smith said. In addition to the hospital divestitures, CHS plans to close two hospi- tals by the end of this year. Knoxville, Tenn.-based Tennova Healthcare, which is part of CHS, will shut down Regional Medical Center in Knox- ville and Lakeway Regional Hospital in Morristown, Tenn., on Dec. 28. When asked about the planned closures on an earnings call Oct. 30, CHS Executive Vice President and CFO Tom Aaron said shutting down the two hospitals "is an important part about trying to acceler- ate and making sure we get down to the right portfolio of hospitals." Mr. Smith said closing the two hospitals "is the right decision" for CHS. "is has no reflection on the employees or the physicians," he said. "is is a good group of people. ey're qualified. ey do excellent work. It's a market share issue for us and how we can best consolidate in the market." CHS' long-term debt totaled $13.54 billion as of Sept. 30, a decrease from $13.88 billion at the end of last year. n UnitedHealth Group paying $69B toward value-based agreements By Morgan Haefner U nitedHealth Group is spending $69 billion on val- ue-based payments, up from $64 billion in 2017, according to Forbes contributor Bruce Japsen. The amount UnitedHealth pays under value-based contracts represents nearly half of its annual reimbursements, Dan Schumacher, president and COO of UnitedHealth's insurance arm UnitedHealthcare, said during the company's third quar- ter earnings call. He said UnitedHealthcare is tracking ahead of its goal to transition $75 billion in payments to value-based agreements by 2020. "We've been very successful in that migration toward a pop- ulation orientation," Mr. Schumacher said Oct. 16, according to Forbes. "Some of our more progressive relationships are actually with our ACO partners, and in those relationships, we work to share data, share insights, drive better coordination, close gaps and care for people." In March 2018, UnitedHealth said it planned to tie $75 billion of its payments to value-based care contracts by the end of 2020, up from $64 billion in 2017, according to the insurer's annual report on value-based care progress. n Essentia Health's operating margin dips below 1% as costs mount By Morgan Haefner D uluth, Minn.-based Essentia Health's operat- ing performance was negatively affected by multimillion-dollar expansion projects in fiscal year 2018, according to financial documents. Essentia saw net patient revenue grow almost 4 per- cent year over year to $2 billion in 2018. However, cost outpaced revenue growth, as total operating ex- penses climbed to $2.1 billion in 2018. As a result, Essentia's operating margin fell from 1.7 percent in 2017 to half a percent in 2018. Essentia Health said its medical campus project con- tributed $12 million to the expenses. Operating per- formance was also negatively affected by $19 million in additional expenses. Including these costs, Essentia's operating income fell to $11 million in 2018, compared to $33 million in 2017. n

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