Becker's Hospital Review

38 CFO / FINANCE CHI to Exit Health Insurance Business By Ayla Ellison C atholic Health Initiatives has decided to divest its health insurance business, according to recent financial doc- uments from the Englewood, Colo.-based system. CHI's insurance subsidiary QualChoice Health, formerly known as Prominence Health, offers Medicare Advantage and commercial insurance products to members in six states. e health insurance business lost nearly $97 million from operations in the first nine months of fiscal year 2016, which ended March 31. In the same period of fiscal 2015, QualChoice recorded an operating loss of nearly $19 million. Due to those losses, CHI cut staff at QualCho- ice in March. In May, CHI executives decided to "exit the health insurance business" and are currently "exploring options to sell" QualCho- ice, according to the financial documents. CHI is one of many systems across the nation that has launched a health plan in recent years. Between 2010 and 2014, the most recent year for which data is available, the number of pro- viders offering health plans steadily increased from 94 to 106, according to a report by McK- insey & Co. However, financial performance of provider-led plans remains mixed. Of the 89 plans analyzed for the McKinsey & Co. report, more than 40 had negative margins in some or all of the past three years. CHI ended the first nine months of fiscal 2016 with an operating loss of $265.6 million on revenue of $12.2 billion. In April, S&P and Moody's Investors Service lowered their ratings on CHI's debt due to the system's persistent losses. n Hospitals See Weaker Volumes of Less Acute Patients in Q1 By Tamara Rosin O rganic inpatient growth is declining in U.S. hospitals, according to a report from Fitch Ratings. A segment of the largest Fitch-rated U.S. for-profit hospital companies reported an average of 0.2 percent organic growth in inpatient admissions and 2.8 percent organic growth in admis- sions adjusted for outpatient activity in the first quarter of fiscal 2016. Compared with the same period in fiscal 2015, year-over- year growth rates of inpatient admissions dropped significantly. Inpatient volume growth is being stunted the most on less-acute patient volumes, as shown in first quarter results, according to Fitch Ratings. Factors contributing to headwinds against inpatient admissions include pressure by payers to reduce short-stay admissions and efforts to reduce readmissions; increasing prevalence of high-de- ductible health plans, which encourage patients to seek care in less expensive settings outside the acute care hospital; and tech- nological advances that enable healthcare providers to handle more complex cases in the outpatient setting. Hospital companies with a business mix weighted toward rural hospital markets and a high exposure to less acute patient vol- umes — such as Franklin, Tenn.-based Community Health Systems and Brentwood, Tenn.-based LifePoint Health — averaged negative 3.7 percent year-over-year organic growth in admissions and 0.7 percent growth in admissions adjusted for outpatient activity. In comparison, growth rates for peers focused on large suburban and urban hospital markets were 2.3 percent and 3.8 percent, respectively. n Sutter to Close Berkeley Hospital in 2030 By Ayla Ellison S acramento, Calif.-based Sutter Health will close Alta Bates Summit Medical Center in Berkeley, Calif., in 2030. California law requires hospitals to meet certain seismic standards by Jan. 1, 2030, and Alta Bates currently does not meet the required standards. In a recent letter to Berkeley City Council, Alta Bates CEO Chuck Prosper said it is infeasible for the hospital to be retrofitted by the last day of 2029, according to a KRON news report. The acute care and emergency services offered at the Berkeley hospital will be consolidated at Sutter's hospital in Oakland, Calif. Mr. Prosper indicated in his letter that shutting down the hospital makes sense even without the seismic standards compliance issue. "Regardless of the seismic deadline, we must adapt to changes in healthcare if we are to sur- vive in today's world. Operating two full service hospitals less than three miles apart is inefficient and inhibits our ability to be most affordable to patients," said Mr. Prosper. Sutter plans to offer certain services in Berkeley after 2029. "We envision Berkeley as our center for outpatient care in the East Bay," wrote Mr. Prosper in the letter. n

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