Becker's Hospital Review

24 CFO / FINANCE CHS Aims to Shed at Least 20 More Hospitals to Reduce Debt Load By Ayla Ellison F ranklin, Tenn.-based Community Health Systems has been on a hospital divestiture spree for the past year, and the company will continue selling off hospitals in 2018. To improve its finances and reduce its heavy debt load, CHS put a turnaround plan into place in 2016. As part of the initiative, the company announced in early 2017 it intend- ed to sell off 30 hospitals. CHS completed its 30-hospital divestiture plan Nov. 1. With the help of proceeds from the hospital sales, CHS brought down its long-term debt load to $13.9 billion in the third quarter of 2017 from $14.8 billion in the same period of 2016. To further reduce its debt, CHS plans to sell another group of hospitals with com- bined revenue of $2 billion. In a presentation to investors at the J.P. Mor- gan Healthcare Conference in San Francis- co Jan. 10, CHS Chairman and CEO Wayne Smith discussed the hospital divestiture spree and how the company's strategy has changed in recent years. CHS previously focused on mergers and acquisitions for growth, and the company owned more than 200 hospitals at one point. However, the company is now focused on improving operations at a much smaller number of facilities. CHS currently owns, operates or leases 127 hospitals in 22 states. Mr. Smith is not sure how many hospitals the company will own aer the divestiture plan is completed, but the goal is to have "theoretically around 100 hospitals that are in significantly improved markets that have sustainability," he said at the conference. CHS ended the third quarter of 2017 with a net loss of $110 million on revenues of $3.67 billion. That's compared to the same period of 2016, when the company record- ed a net loss of $79 million on revenues of $4.38 billion. n Northwestern Memorial HealthCare's Net Income Nearly Doubles in Q1 By Ayla Ellison C hicago-based Northwestern Memorial HealthCare's operating income dipped lower in the first quarter of fiscal year 2018, which ended Nov. 30. However, it ben- efited from higher investment gains and saw net income rise year over year. The nonprofit system reported revenue of $1.3 billion in the first quarter of fiscal year 2018, up from $1.2 billion in the same peri- od of the year prior. The financial boost was primarily attributable to an increase in net pa- tient service revenue, which climbed 6.8 per- cent year over year to $1.24 billion, according to recently released bondholder documents. After factoring in a 7.7 percent year-over-year increase in expenses, the system ended the first quarter of fiscal year 2018 with operating income of $109 million. That's down 1.8 per- cent from $111 million in the first quarter of fiscal year 2017. Fueled by a significant increase in investment gains, NMHC recorded net income of $337.5 million in the three months ended Nov. 30, which was nearly double the net surplus of $182.7 million the system recorded in the first quarter of fiscal year 2017. n UnitedHealth's Profits More Than Double in Q4, Fueled by One-Time Tax Boost By Morgan Haefner U nitedHealth Group more than doubled its profits in the fourth quarter of fiscal year 2017, largely due to a one-time tax benefit and continued growth in its Optum arms. The nation's largest health insurer reported net earnings of $3.6 billion attributable to UnitedHealth in the fourth quarter ended Dec. 31, com- pared to $1.7 billion during the same period a year prior. UnitedHealth said a one-time tax gain of $1.22 per share drove the increase in net earnings. UnitedHealth kept expenses in check in the fourth quarter of 2017, recording $48.1 billion in total operating costs, and posted revenue of $52.1 billion in the fourth quarter of 2017. That's up 9.7 percent from $47.5 billion in revenue reported in the same quarter a year prior. The company said revenue growth reflected strong demand for United- Health's product and service offerings. The company's insurance arm, UnitedHealthcare, grew its consumer base by 480,000 members in the fourth quarter of 2017 compared to the same period a year prior. This boosted UnitedHealthcare's revenue by 9.6 percent year over year to $41.6 billion, compared to $37.9 bil- lion reported in the same quarter of 2016. UnitedHealth's Optum health services businesses saw revenue grow by 10 percent to $24.4 billion in the fourth quarter of 2017 compared to the same period a year prior. The surge was led by double-digit percentage growth at OptumHealth and OptumInsight. UnitedHealth expects adjusted net earnings of $12.30 to $12.60 per share in 2018, compared to previous estimates of $10.55 and $10.85 per share. n

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