Becker's Hospital Review

12 CFO / FINANCE Tower Health points to Epic install costs for operating loss By Ayla Ellison T ower Health reported higher operat- ing revenues in the first half of fiscal year 2019 than in the same period of the year prior, but the West Reading, Pa.-based health system ended the first six months of the current fiscal year with an op- erating loss, according to unaudited financial documents released Feb. 12. Tower Health reported revenues of $905.1 million in the six months ended Dec. 31, up from $729 million in the same period a year earlier. e increase was largely attributable to the health system operating more hospi- tals. Tower Health acquired five hospitals and their affiliated physician groups from Franklin, Tenn.-based Community Health Systems in October 2017. Tower Health said expenses climbed 27 per- cent year over year to $927.1 million. During the first half of fiscal 2019, the health sys- tem recorded $7.4 million in one-time ex- penses — $4.6 million was related to Epic implementation costs at the newly acquired hospitals, and the remainder was related to other one-time transaction costs. As of Dec. 31, Tower Health had spent $63 million on the Epic installation at the five hospitals. e health system plans to spend another $51 mil- lion to complete the implementation by Aug. 3. e health system said an unanticipated large number of denied and delayed claims from commercial insurers dragged down revenue and liquidity in the first half of fiscal 2019. Most of the denied and delayed claims were submitted by the system's five new hospitals, which continue to operate with a manual EMR system. "A majority of denials that management is challenging relate to provider identity, inpa- tient to observation downgrades and medical necessity issues, which are automated items in an Epic environment," state the financial documents. "Management is addressing this issue with an implementation of the Epic EMR at the five new hospitals." Tower Health's chief revenue cycle officer has hired a revenue cycle consulting firm to support the revenue cycle operation at the five new hospitals, according to the financial documents. Tower Health ended the first two quarters of fiscal 2019 with an operating loss of $21.95 million. e system reported an operating loss of $1.78 million in the same period of the year prior. Aer factoring in a $19.2 million loss on in- vestments and other nonoperating losses, Tower Health posted a net loss of $42.9 mil- lion in the first two quarters of fiscal 2019. at's compared to the first half of fiscal 2018, when the health system reported net income of $111.1 million. Tower Health has identified cost savings op- portunities and management is taking several steps to improve the system's financial picture in the long term. "Management has implemented several cor- rective actions by investing resources to ad- dress deferred maintenance at the acquired hospitals, initiated a market positioning and branding strategy, and developed consum- er engagement initiatives," state the finan- cial documents. "In addition, management continues to pursue review opportunities to monetize non-core assets, expand philan- thropy and grants, and explore partner- ship opportunities to advance system goals in an efficient manner." n Ohio hospital to close after 105 years By Ayla Ellison B elmont Community Hospital, a 99-bed hospital based in Bellaire, Ohio, will close April 5. The hospital opened as Bellaire City Hospi- tal in 1914 and was acquired by Wheeling (W.Va.) Hospital in 1996. "Utilization of BCH has continued to decline despite efforts to offer varying services at the facility," the hospital said in a press re- lease. "The decline has place[d] a financial strain on the BCH that cannot be sustained in the long term." Wheeling Hospital will offer jobs to some of Belmont Community Hospital's 93 employees. The six health centers that operate under Belmont Community Hospital will remain open after the hospital closes. n Kansas hospital abruptly closes By Ayla Ellison O swego (Kan.) Community Hospital and its two affiliated clinics closed Feb. 14. The critical access hospital, owned by Kansas City, Mo.-based Empow- erHMS, said in a Facebook post that the abrupt closure was due to "un- foreseen circumstances." A statement from the board announcing the clo- sure said the hospital wasn't bringing in enough revenue to cover payroll and other expenses, according to The Garden City Telegram. Officials said Oswego Community Hospital was facing the same challeng- es as other rural hospitals across the nation. "At Oswego, we have weathered low patient volumes; high number of uninsured patients; low reimbursement rates; difficulty in getting payment from private insurance providers; low Medicaid and Medicare rates; and the state's refusal to expand Medicaid," the prepared statement said, ac- cording to the report. "The trickle of low revenue stream we have generat- ed has not been enough to cover payroll, let alone to meet all of the other costly expenses needed to operate and maintain a hospital." Other hospitals owned by EmpowerHMS have reported financial chal- lenges as well. The company failed to pay staff at Washington County Hospital in Plymouth, N.C., on Feb. 8. n

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