Becker's Hospital Review

31 CFO / FINANCE CHS Expects $137M Net Loss in Q2, Says Divestitures Will Continue By Ayla Ellison F ranklin, Tenn.-based Community Health Sys- tems ended the second quarter of 2017 with a net loss of $137 million, marking the fih consecutive quarter the company has posted a loss, according to a preliminary earnings statement re- leased July 26. CHS recorded revenues of $4.14 billion in the sec- ond quarter of this year, down 9.7 percent from rev- enues of $4.59 billion in the same period of 2016. e drop was attributable, in part, to lower patient volumes. Total admissions were down 10.8 percent in the second quarter of 2017 compared to the same quarter of last year. On a same-facility basis, admis- sions were down 2.5 percent year over year. In addition to a drop in patient volume, CHS said the lower-than-anticipated results in the second quarter were attributable to higher expenses related to purchased services, medical specialist fees and information systems. e company's financial re- sults also included one-time expenses related to its hospital divestitures. e company ended the period with an operating loss of $131 million. at's compared to the $1.43 billion operating loss CHS reported in the second quarter of 2016, when it recorded a noncash im- pairment charge of $1.4 billion. To improve its finances and reduce its nearly $15 bil- lion debt load, CHS put a turnaround plan into place last year. As part of the plan, the company announced earlier this year that it intended to sell off 30 hospitals. CHS completed the sale of nine hospitals on June 30 and July 1, bringing its total completed divestitures to 20 out of the 30 it intends to sell off. e compa- ny said it expects to complete the divestiture of the remaining 10 hospitals by Sept. 30. In its preliminary earnings release, CHS said it plans to continue to unload more hospitals. "In addition to the previously announced divesti- ture of 30 hospitals, the company continues to re- ceive interest from acquirers for certain of its hospi- tals. e company is pursuing this interest for sale transactions involving hospitals with a combined total of at least $1.5 billion in annual net revenue and combined mid-single digit adjusted EBITDA margins," CHS said. CHS will release its formal numbers for the second quarter and the first half of 2017 on Aug. 1. n PwC: Healthcare Deal Volume Decreased 18% Since Q1 2017 By Alyssa Rege T he U.S. health services industry witnessed more than 200 deals during the second quarter of 2017, according to a July 27 report by PricewaterhouseCoopers. For the report, PwC defined U.S. mergers and acquisitions activity as "mergers, acquisitions shareholder spin-offs, capital infusions, consolida- tions and restructurings where acquisition targets are U.S.-based compa- nies acquired by U.S. or foreign acquirers." Here are six insights from the PwC report. 1. While announced deal volumes decreased slightly during the second quarter, deal values totaled roughly $49.6 billion. This represents a 201 percent increase from the second quarter of 2016 and a 514 percent in- crease from the first quarter of 2017. 2. Two-hundred and nineteen deals took place during the second quarter. The figure represents a 15 percent decrease in deal volume compared to the second quarter of 2016, and an 18 percent decline in deal volume compared to the first quarter of 2017. 3. Ten "megadeals" — deals exceeding more than $1 billion in value — took place during the second quarter. The megadeals accounted for $43.3 billion in deal value or 87 percent of the total deal volume for the second quarter. 4. The most active subsector of the health services industry, in terms of deal volume, was long-term care. The sector witnessed 75 deals, which accounted for 34 percent of the total number of deals during the second quarter, the report states. 5. Both the managed care and home healthcare subsectors saw a 100 percent decline in terms of deal value. The report notes the subsectors did not have any transactions with disclosed deal values during the second quarter. 6. Analysts concluded there were no initial public offerings in the health services sector during the second quarter. Two IPOs took place in both 2015 and 2016, down from six in 2014. n DOJ Charges 412 in $1.3B Healthcare Fraud Sweep By Ayla Ellison T he Department of Justice has charged 412 defendants, including 115 physicians, nurses and other licensed medical professionals, in a na- tionwide healthcare fraud sweep. The defendants allegedly participated in healthcare fraud schemes involv- ing $1.3 billion in false billings. More than 120 defendants were charged with illegally prescribing and distributing opioids and other narcotics. In addition to the arrests, HHS initiated actions to suspend the licenses of 295 providers, including physicians, nurses and pharmacists, according to the DOJ. "Too many trusted medical professionals like doctors, nurses and pharma- cists have chosen to violate their oaths and put greed ahead of their pa- tients," said Attorney General Jeff Sessions. "They seem oblivious to the disastrous consequences of their greed. Their actions not only enrich them- selves often at the expense of taxpayers but also feed addictions and cause addictions to start." n

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