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Analysis

Quorum Health Posts $25.9M Loss in Q2

August 09, 2018

Net operating revenues for the Tennessee-based, for-profit hospital chain dropped $57.5 million in an eventful second quarter that saw the departure of CEO Thomas D. Miller.

Quorum Health Corporation posted a $25.9 million net loss in the second quarter that the Brentwood, TN-based company blamed largely on ongoing hospital divestitures.

"We are pleased with our second quarter," Quorum Interim CEO Robert H. Fish said Thursday in a conference call with analysts. "We believe the result represent good progress on the initiatives that were discussed in quarter one and demonstrate further execution of our strategic plan."

Net revenues fell $57.5 million to $472.6 million at the end of the quarter, primarily because of a $73.1 million decrease from the hospitals sold or shuttered. Those losses were partially offset by a $7.9 million gain generated under the California Hospital Quality Assurance Fee program.

When the losses from divested hospitals and the HQAF windfall are factored out, Quorum reported that operating revenues increased $7.7 million in the second quarter, when compared with the second quarter of 2017. The increase is mostly due to an improved payer mix and an increase in rate and acuity.

The second quarter proved to be eventful for Quorum with the sudden retirement in May of CEO Thomas D. Miller, who was retained as a consultant by the hospital chain.

Fish, who's served as interim CEO since Miller's departure, said Thursday he is "still in the early stages of reviewing the strategic plan and assessing our portfolio but I believe we have the right building blocks to achieve sustainable growth."

"While we have a ways to go, I am confident on our ability to capitalize on a number of significant opportunities. In a relatively short period of time this company can become much stronger, which will benefit all of our stakeholders," Fish said.  

Quorum said in documents filed with the Securities & Exchange Commission that Miller's departure was not related to an ongoing dispute with its former parent company, Community Health Systems, which is seeking early termination of two transition agreements the two companies signed when CHS spun off 38 hospitals in 2016 to form Quorum as a separate company.

  • Same-hospital admissions fell 3% for the quarter, and adjusted admissions dropped 1.8%, however net operating revenues per adjusted admission rose 5.3%, compared with the second quarter of 2017.
     
  • For the first half of 2018, Quorum reported that net operating revenues fell $98.3 million to $959.5 million, compared with slightly more than $1 billion for the first six months of 2017. Again, the decrease was attributed to a $133.7 million decrease from divested hospitals.
     
  • Through the end of the second quarter, Quorum has received $84.8 million from divestitures, which includes $8 million held in escrow, and used $75 million to pay down the debts.
     
  • Quorum said it expects the ongoing hospital sell-off will generate an additional $165 million to $215 million by the end of 2019. To date, Quorum has signed a definitive agreement to sell one hospital and has signed letters of intent to sell six other hospitals. The six LOI hospitals represent about $115 million in potential net proceeds.


KEY TAKEAWAYS

Net revenues fell $57.5 million in Q2, primarily because of a $73 million decrease from closed or sold hospitals.

The hospital chain has letters of intent to sell six hospitals, and a definitive agreement to sell another.

Net operating revenues are down nearly $100 million in the first half of 2018.


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