Becker's Hospital Review

13 CFO / FINANCE 93-Year-Old California Hospital to Close Over Inability to Meet New Seismic Standards By Ayla Ellison C ommunity Medical Center Long Beach (Ca- lif.), which opened in 1924 and is part of Fountain Valley, Calif.-based MemorialCare Health System, will close in the near future due to the inability to retrofit the hospital to meet California's seismic standards. When MemorialCare acquired Community Medical Center Long Beach in 2011, officials knew it had seis- mic challenges. However, the hospital consulted with seismic experts, structural engineers and architects as part of recent seismic studies, which revealed the fault running below the hospital is larger and more active than previously known, hospital officials said Nov. 6, according to e Grunion. is means the hospital will not meet California's new earthquake safety requirements for acute care hospitals, which go into effect June 30, 2019. John Bishop, CEO of the three MemorialCare hospi- tals in Long Beach, said because the wide fault zone is under the majority of the hospital campus, no work can be done to make the hospital viable, according to the Long Beach Post. "We are all saddened that the findings were not more encouraging for the future of Community Medical Center Long Beach," said Mr. Bishop. He said Memori- alCare has no choice but to close the hospital. However, he said hospital and city officials will work together on transition plans to meet the needs of the community. "Nothing involved in this was an elective decision. We had no choice," Mr. Bishop said. "I'm saddened by this, but I want to assure Long Beach residents Me- morialCare continues to be dedicated to providing the healthcare the city needs." Mr. Bishop said hospital officials will discuss the mat- ter with city officials to determine how long the hos- pital and its emergency department will remain open. A recent study found there are seven acute care hos- pitals within a short distance of Community Medical Center Long Beach that could absorb the hospital's pa- tients, and the need for acute care inpatient beds will decrease as more patients are shied to outpatient care settings, according to the Long Beach Post. n Healthcare Bankruptcies More Than Triple in 2017 By Ayla Ellison R egulatory changes, the rise of high-deductible health plans and advances in technology are a few of the factors that have taken a toll on healthcare companies' finances, and these challenges may lead many hospitals and other medical companies to restructure their debt or file for bankruptcy in the coming year, according to Bloomberg. Although hospitals are expected to face financial challenges in the year ahead, many healthcare companies are already struggling. According to data compiled by Bloomberg, healthcare bankruptcy filings have more than tripled in 2017. Healthcare bankruptcies are on the rise as filings across the broader economy have fallen since 2010, according to the report. The challenges in the healthcare sector may hit rural hospitals the hard- est due to the reduction in Disproportionate Share Hospital payments. The ACA calls for annual aggregate reductions to DSH payments from fiscal year 2014 through fiscal year 2020. Subsequent legislation delayed the start of the reductions until fiscal year 2018, which began Oct. 1, and pushed the end date back to fiscal year 2025. David Neier, a partner at Winston & Strawn, told Bloomberg the cuts to DSH payments may "single-handedly throw hospitals into immediate fi- nancial distress." n Mercy's Operating Income Falls 59% in Q1 of FY 2018 By Morgan Haefner C hesterfield, Mo.-based Mercy reported a drop in operating in- come in the three months ended Sept. 30, as operating expenses related to a recent acquisition climbed. The 44-hospital system saw net operating income fall 58.6 percent to $12.4 million in the three months ended Sept. 30, the first quarter of the system's 2018 fiscal year, according to unaudited financial documents. That's compared to $30 million in operating income recorded in the same period a year before. The system's operating margin also fell to 0.8 percent, compared to 2.2 percent in the same period a year prior. At the same time, Mercy's operating expenses climbed 13.5 percent. The system reported operating expenses of $1.5 billion, compared to $1.3 billion in the same quarter a year prior. Mercy attributed the increase primarily to supplies and salary expenses related to its acquisition of St. Anthony's Medical Center in St. Louis, which was effective June 1, 2017. Mercy ended the first quarter with an 11.9 percent increase in operating revenue. The system reported operating revenue of $1.5 billion in the three months ended Sept. 30, up from $1.3 billion in the same period a year prior. Again, Mercy attributed the change to its St. Anthony's Medi- cal Center acquisition, which increased patient volumes. Including nonoperating gains, Mercy ended the first quarter with net in- come of $55.9 million, down 30.4 percent from $80.3 million recorded in the same period last year. n

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