Wall Street

HMA, Tenet still face financial struggles

Anne Zieger — Wed, 13 Aug 2008 10:41:54 -0400

Health Management Associates has had a rough second quarter, putting in it in the unenviable position of being perhaps the worst-positioned major hospital player, according to some analysts. Both HMA and Tenet had difficult second-quarter results, with Tenet posting its second quarterly loss in a row and HMS reporting a significant drop in second-quarter admissions.

The thing is, Tenet could at least boast improved bad-debt control and a smaller loss that had been cut by half from the previous quarter, as well as admissions gains of at least 2.5 percent in most of its regions. It also saw a growth in outpatient volume, including a 3.4 percent growth in outpatient surgery cases through its freestanding ambulatory surgery centers. (One major downside, however, was that commercially-insured admissions fell by 2.2 percent.)

HMA, meanwhile, missed both top-line and bottom-line estimates for Q2. Revenue was up 3.9 percent to $1.11 billion, falling below its $1.13 billion forecast, and net income grew 4.1 percent to $12.4 million. That doesn't sound terrible, but earnings per share still came in a penny short of Wall Street targets.

Generating more concern from company watchers, HMA's admissions fell 3.8 percent in the second quarter, mostly caused by a drop in insured patients. However, observers say some of these problems may have been generated by problems at HMA's Franklin Regional in North Carolina, which has been threatened with a loss in CMS certification over quality problems.

To learn more about the chains' performance:
- read this piece from TheStreet.com

Related Articles:
HMA adopts tougher collections strategy
HMA sells seven-hospital stake to Novant
Analyst says Tenet poised for major turnaround
Tenet turning around: Admissions grow, losses fall

Time to perfect non-aggressive collections methods

Wed, 04 Jun 2008 06:59:59 -0400

Over the last several months, the hospital industry has come under particularly intense pressure to cut down on bad-debt ratios. Not only are high bad-debt levels a major drain on performance, they're often seen as a sign (by, say, ratings agencies and Wall Street) that the hospital doesn't have its act together.

So how can financial leaders respond? Well, lots of ways, of course, including:

* Doing a better job of qualifying patients for state and federal programs that can cover a significant portion of their bills.

* Making it easier for patients to pay their bills (as with Tenet's recent addition of an online bill payment option).

* Collecting more money up front before delivering non-emergency services.

* Instituting collections efforts, either en masse or by targeting patients most likely to pay.

As you'll probably agree, these methods range widely in aggressiveness, from helping the patient file paperwork to full-scale pursuit of their assets.

Now, any one of these tactics might cut down bad-debt ratios overall. And depending on how they're handled, they may or may not discourage the patient from choosing your facility again. The thing is, you've got a couple of powerful forces working against you that argue for perfecting more-gentle tactics.

First, the U.S. economy remains wobbly at best, with jobs going away while gas and food prices are through the roof. Push a patient too hard over a healthcare bill and you'll probably get a bankruptcy notice, not a big recovery.

Meanwhile, with CDHPs still a presence out there, you're going to run into a lot of patients with very substantial co-pays to handle. If your organization doesn't develop the tact, creativity and--let's admit it--sales skills to make sure solvent families pay their bills, you're in trouble. After all, every time you have to fight for your money--in court or through an agency--it costs you.

It will be interesting to see, in the next six to twelve months, whether aggressive strategies or the kinder, gentler machine-gun hand works. I'm arguing that for the time being, being Mr. Nice Guy will work better.

But readers, what do you think? Let me know what your experience has been--I'd love to hear from you. - Anne

S&P to monitor non-profit hospital tech spending

Wed, 14 May 2008 06:59:58 -0400

Over the next few years, credit rating firm Standard & Poor's plans to take a much closer look at the extent to which not-for-profit hospitals keep up with their peers in making technology investments while keeping finances otherwise in order. In fact, investment in advanced medical technology will be a key factor differentiating those with good and poor credit ratings, the firm said.

That being said, a strong technology investment program won't impress S&P all by its lonesome. The firm says it's going to look carefully at whether a hospital's medical technology investments made sense and what impact they had. Generally speaking, the firm warned, it still expects that given the pressures on the industry, hospital credit downgrades probably will outnumber upgrades in 2008, and possibly into 2009.

To learn more about S&P's plans:
- read this Modern Healthcare article (reg. req.)

Related Articles:
Moody's shows little enthusiasm for non-profit hospital finances
Health IT plans affect financial ratings
Ratings firms slam nonprofit hospital finances
Crisis may change tax-exempt bond rating system

Fear and trembling in health plan land

Wed, 07 May 2008 06:59:59 -0400

Well, this week caps it. It seems like we're looking at just about a clean sweep where bad-news health plan financials are concerned: UnitedHealth Group, Humana, Cigna, WellPoint, Kaiser and Health Net have already taken a hit, and that's just for the first quarter. It's hard to imagine the second quarter of this year will bring dramatically better news, either.

Now, it's worth noting that we're talking primarily about plans that have watched profits fall, not plans who've sunk into the red. It's not like WellPoint or Kaiser are headed for bankruptcy court by any means. But we are talking about a shock to the industry--and some plans are indeed in the hole. For example, Moody's has placed Health Net's senior debt on review for a downgrade following its first quarter net loss of $35.7 million.

So what's going on here? A lot of different factors seem to be in play, including the turmoil in the financial markets, medical costs, legal and regulatory issues, and more. For example, as you'll see in today's newsletter, Kaiser attributed its losses largely to the subprime mortgage debacle. Oxford Health Plans, meanwhile, reported a medical loss ratio of 102.8 percent in addition to losing money on Wall Street. (In other words, for those that don't speak insurance, Oxford paid out almost $1.03 for every premium dollar it took in.) Health Net took a drubbing, in part, because it had to pay off regulators in California who were fed up with its practice of canceling individual policies after they were issued.

Once Wall Street recovers, the plans' investment income will again cover a multitude of sins, and the industry will regain its swagger. In the meantime, things aren't going to be pleasant for its leaders, and providers who have to strike deals with them may find themselves getting savaged. After all, it can be dangerous to be trapped in a room with a rabid health plan executive. - Anne

Tenet sees $31 million loss for Q1

Wed, 07 May 2008 06:59:57 -0400

Dogged by expenses from lawsuits, Tenet Healthcare announced a $31 million first-quarter loss. Tenet reported a net loss of $31 million for the first quarter of this year, compared with a profit of $75 million for the same quarter last year when it enjoyed a $92 million tax gain. This quarter, Tenet faced litigation costs of $47 million pre-tax, which it set aside for wage and hour lawsuits and other employment matters. On the brighter side, its facilities saw a 1 percent increase in total admissions for this quarter compared to the first quarter of last year. Tenet also saw a drop in charity admissions due to an increased number of patients qualifying for Medicaid.

The unprofitable earnings report doesn't seem to have shocked Wall Street, which actually rewarded the company with a slight gain in its stock price the day the results were released. However, it is something of a counterweight to a recent favorable report from high-profile healthcare analyst Ken Weakly of Credit Suisse Securities, who ranked the stock as "outperform" and predicted a major improvement in its fortunes.

To learn more about Tenet's results:
- read this press release

Related Articles:
Analyst says Tenet poised for major turnaround
Tenet turning around: Admissions grow, losses fall
Tenet may be ready for comeback
Tenet execs detail turnaround progress
Tenet fights bankruptcy rumors