The fourth quarter marked another period of financial struggle for the health system.
Community Health Systems continues to feel pressure on its bottom line as it works to reshape its portfolio to become profitable.
Increased costs from claim denials and outsourced medical specialists, along with lost revenue from ongoing divestitures, cut into the hospital operator's fourth quarter and year-end earnings, CHS reported.
The Franklin, Tennessee-based health system saw its losses jump to $516 million for 2024, compared to a $133 million loss in 2023, while the fourth quarter featured a $70 million loss, versus a $46 million gain over the same period in the previous year.
CHS has recently been divesting hospitals to open up funding, clear debt, and boost its finances. In 2024, it sold Tennova Healthcare-Cleveland to Hamilton health Care System for $160 million before offloading two North Carolina hospitals to Iredell Health System.
This year, CHS is expected to sell ShorePoint Health in Florida and Lake Norman Regional Medical Center in North Carolina, which CHS CFO Kevin Hammons anticipates bringing in $550 million in gross proceeds, he told investors on an earnings call.
"In addition to these previously announced transactions, we continue to advance discussions on additional divestitures that we expect to announce in the near future, also at very attractive multiples," CHS CEO Tim Hingtgen said on the call. "All told, these pending and expected transactions should generate more than $1 billion in total proceeds, which we expect to lead to meaningful deleveraging and increased shareholder value."
CHS has also been investing in outpatient care, such as purchasing 10 Arizona-based urgent care centers and opening two freestanding emergency rooms.
Speaking on the shift in strategy from acute care to outpatient care, Hingtgen said the core portfolio is smaller, but "generating roughly these similar amount of net revenue as three or four years ago. So we know that our investments are yielding the intended outcomes, caring for more patients and driving that type of growth."
However, CHS leadership highlighted challenges CHS is facing with costs stemming from claim denials and medical specialist fees.
In terms of denials, Hingtgen noted that the situation "has shown some stabilization since the third quarter."
Meanwhile, CHS experienced a "sharper increase" in medical specialist fees, which rose 12% in the fourth quarter on a same-store basis for a total of $170 million. For 2024, medical specialist fees hit $640 million, representing a 10.9% climb on a same-store basis from the previous year.
"To mitigate this trend, we have scaled our proven capabilities for managing in-sourced hospital-based services beyond hospitalist and emergency medicine into a growing number of anesthesia programs," Hingtgen said.
In its initial guidance for 2025, CHS is forecasting net revenue of $12.2 billion to $12.6 billion, and adjusted EBITDA of $1.45 billion to $1.6 billion.
New analysis identifies private equity investment trends in the industry and how a changing environment could spur an increased pace.
Following a steady, but modest, year of private equity dealmaking in healthcare, 2025 could see higher levels of activity as market conditions shift.
Analysts forecast an increase in transactions due to falling interest rates, a more favorable regulatory environment under the Trump administration, and dry powder available to invest, according to a report by the Private Equity Stakeholder Project (PESP).
In the face of high interest rates and ramped-up regulatory scrutiny in 2024, 1,049 unique deals were completed by private equity firms last year, which marked a 7.6% decline from the 1,135 deals tracked in 2023, the study found.
Of the deals made in 2024, 166 were buyouts, 262 were growth/expansion investments, and 621 were add-on acquisitions to 383 unique platform companies.
The subsectors that experienced the highest activity were dental care with 161 deals, health IT with 140 deals, outpatient care with 139 deals, medtech with 105 deals, pharma services with 80 deals, home health, home care, and hospice with 73 deals, and behavioral health with 65 deals.
Private equity dealmaking peaked in 2021 and has since been trending downwards as high interest rates have made debt more expensive and harder to secure, causing firms to be more hesitant with assets, the report highlighted. As interest rates continue to decrease this year, analysts anticipate that private equity firms will get more aggressive with their investments.
Meanwhile, regulatory scrutiny picked up during the Biden administration as lawmakers put the spotlight on potential consequences of private equity ownership, including increased prices and lowered care quality.
A bipartisan report from the Senate Budget Committee released in January detailed how two private equity firms negatively impacted two hospital operators.
However, "it is unlikely that inquiries, investigations, and regulatory efforts undertaken by various federal agencies during the Biden administration to better address private equity in healthcare will carry into the Trump administration, which is moving to reduce the federal bureaucracy and workforce and pursue deregulatory priorities," PESP said.
The Federal Trade Commission's recent settlement with Welsh, Carson, Anderson and Stowe could foreshadow how the agency approaches private equity ownership going forward under new chair Andrew Ferguson.
Private equity firms can further avoid antitrust scrutiny by engaging in joint venture partnerships rather than traditional mergers and acquisitions, especially when the partnership combines nonprofit health systems with for-profit entities, the report noted. Joint ventures also allow private equity firms to access new markets through trusted organizations to achieve growth.
The drugstore chain is reportedly nearing a sale to the private equity firm that could lead to a breakup of its businesses.
After several months of on-again, off-again rumors, Walgreens' fate in a potential sale may finally be reaching a resolution.
The retail pharmacy giant and private equity firm Sycamore Partners are closing in on a $10 billion deal to take the company private, according to The Wall Street Journal, which cited people familiar with the matter.
The report stated that the two sides have been discussing Sycamore paying between $11.30 a share to $11.40 a share in cash to complete the transaction.
Discussions of a deal were first reported in December after Walgreens shares fell and its market value plummeted from $100 billion in 2015 to under $8 billion at the end of 2024.
If Sycamore takes over, it could result in the company's businesses being split up three ways, with U.S.-based Walgreens, U.K-based chemist and retailer Boots, and speciality pharmacy Sheild Health Solutions turned into independent units, according to The Financial Times.
Sycamore is expected to retain Walgreens' U.S. retail business in the event a deal is completed, WSJ said. Though the firm doesn't have experience with healthcare investments, it is well-versed in the retail space and could make the most of Walgreens' brick and mortar footprint.
However, Walgreens has been working to shut down unprofitable store locations to reduce costs, including closing 70 stores in the first quarter of the fiscal year and planning for another 450 closures this year.
For the first quarter, the company beat Wall Street expectations and saw its sales increase by 7.5% year over year, but still reported a net loss of $265 million, compared to $67 million in the same period for the previous year.
Days after posting its earnings, Walgreens suspended its quarterly dividend for the first time in 92 years to reduce debt and conserve cash.
It's the final project in the health system's initiative to build out its hospitals and campuses across multiple states.
Mayo Clinic announced it will begin its largest-ever expansion in the state of Arizona.
The $1.9 billion investment to transform its Phoenix campus will allow the Rochester, Minnesota-based health system to increase its clinical space while adding jobs in the area.
Mayo said the project, which is part of its system-wide "Bold. Forward. Unbound." strategy to build on its physical infrastructure, will kick off this year and is expected to be completed in 2031.
The expansion is set to cover 1.2 million square feet and includes the construction of a new procedural building, a five-floor vertical and horizontal expansion of the Mayo Clinic Specialty Building, integration of new technology, and enhancement of the arrival experience for patients and visitors, along with the formation of 11 operating rooms and two patient units supporting 48 beds.
Additionally, the plan features a two-story, indoor promenade that wraps around the front of the campus and the development of "care neighborhoods" to improve the patient experience by grouping clinical services.
Richard J. Gray, M.D., CEO of Mayo Clinic in Arizona, stated in a video detailing the plans that the project will lead to 59% more clinical space. Inclusive of that is an increase of 62% in MRIs, 31% in operating rooms, and 44% in number of CT scanners.
The expansion will also result in the creation of more than 3,500 jobs in the state, according to Gray.
"The dramatic growth in our metropolitan area, state and region has led to an escalating need for care of patients with complex medical conditions that is difficult to accommodate with our current technology and infrastructure," Gray said in the news release. "We continue to believe that Arizona is a great place to advance new cures, new collaborations and Mayo's distinctive model of care."
Mayo's "Bold. Forward. Unbound." initiative includes projects across multiple states. The system announced a $432 expansion of its hospital in Jacksonville, Florida in 2022 before unveiling a $5 billion redesign of its downtown Rochester campus in 2023.
Last year, Mayo completed construction on a hospital bed tower in Mankato, Minnesota, for $155 million and on a new hospital in La Crosse, Wisconsin, for $215 million.
Gianrico Farrugia, M.D., president and CEO of Mayo Clinic, said in a statement: "Through this work, we are physically and digitally transforming healthcare and blurring the lines between inpatient and outpatient care to support Category-of-One healthcare for our patients, a Category-of-One workplace for our staff and to serve as a blueprint for the world."
The health system "actively, critically, and deliberately" identified and executed on areas that needed improvement, interim CEO Deborah Addo said.
In this episode of HL Shorts, Penn State Health interim CEO, president, and chief operating officer Deborah Addo shares how the health system achieved a $217 million turnaround in fiscal year 2024.
Dr. Eric Dickson shares with HealthLeaders the importance of getting clinicians on board with AI for alleviating hospital capacity constraints.
As an aging population continues to grow and require more care over time, hospitals have no choice but to become more efficient to survive and serve their communities effectively.
To do that, healthcare must find answers for two mega trends that the industry can't ignore, according to UMass Memorial Health (UMMH) president and CEO Dr. Eric Dickson: the widening ratio of patients to healthcare workers and how technology like AI can aid in uncluttering hospitals.
"If I could fix one thing right now today for our healthcare system, it would be getting patients out of the hospital that don't need to be there," Dickson told HealthLeaders. "That would fix all the other problems that are really symptoms of the root cause."
At Worcester, Massachusetts-based UMMH, the academic medical center is running at about 110% capacity as long length-of-stay times are being compounded by the lack of labor, resulting in significant lost revenue, Dickson noted.
Hospital occupancy rates are expected to only go up in the coming years, placing further financial and operational stress on organizations, as well as increasing the risk of burnout for workers.
Unless something changes, the national average hospital occupancy rate could reach 85% as soon as 2032, constituting a bed shortage, a recent study published in JAMA Network Open revealed. The increasing occupancy rates are less about the rise in hospitalizations and more about the decline in number of staffed beds, highlighting the importance of a strong workforce.
For Dickson, the providers that learn how to utilize AI to create more efficiency among their staff will be the ones that solve their workforce challenges. The key to that, however, is getting the buy-in from physicians and other clinicians.
"AI is math and for years we've known solutions to problems mathematically but could never implement them because of the psychology of change," Dickson said.
Pictured: Dr. Eric Dickson, president and CEO, UMass Memorial Health.
Dickson's clinical background helps him communicate to his doctors how AI can benefit them, but he's doing more to deepen his understanding of the technology to make it as palatable as possible for his staff. That includes enrolling in the Stanford healthcare AI certificate program and setting up an AI governance structure at UMMH.
"I'm spending much more time thinking about the psychology of getting people to use AI and the data platform and how the data gets entered and making sure we have our data platform right, more so than which AI do we want to use and how do you roll it out. Because I think if you don't have those two building blocks correct, you're going to fail," Dickson said.
Aside from calibrating AI to address the needs of the staff using it, it's also on organizations to have the right data platform, Dickson emphasized. Unless you input good data, you're not going to come out with the AI result that you want. Where systems are likely to falter, the leader of UMMH pointed out, is in the inaccuracy of data that goes into their system.
Stepping into the relatively unknown landscape of AI isn't for the faint of heart, but it will be necessary for organizations that want to thrive in the future.
"There are going to be big winners and big losers in healthcare over the next decade, and it's primarily the losers that are going to be the ones that didn't get AI right and the winners are going to be the ones that did. The winners are going to have a tool that's going to make them 20% to 30% more efficient," Dickson said.
"We, at UMass Memorial, are doing everything we can to make sure we're on the winning side of that equation."
The job cuts will improve efficiency and allow frontline workers more access to leadership, according to the health system.
Coming on the heels of an announcement that it would conduct the largest layoffs in its history, Mass General Brigham (MGB) released its first quarter earnings, which showed a sluggish start to the fiscal year.
The Sommerville, Massachusetts-based health system experienced increased labor and supply costs, along with capacity constraints, but expects to save more than $200 million per year from the job cuts.
In its earnings filing, MGB said it is "accelerating action plans to reduce the rate of expense growth through a strategic reorganization of management and administrative positions."
Earlier this month, the hospital operator stated it would eliminate hundreds of non-clinical workers due to a projected $250 million budget gap over the next two years. MGB has reportedly been working to trim down administrative roles after studies revealed that it had an inefficient management structure.
When reporting its first quarter finances, MGB said that the reorganization strives to "reduce bureaucracy, enhance decision-making, improve communication and foster a more agile environment." Additionally, it will create more transparency and accountability by giving frontline staff more access to leadership.
For the quarter, the system recorded an operating loss of $53.8 million (-1% operating margin), which was a decline from the $32 million operating loss (-0.7% operating margin), excluding $114 million of prior year revenue, over the same period the previous year.
MGB brought in $282 million in net income, which more than halved the net income of $579 million in same quarter last year.
Both operating revenue and operating expenses increased around 11% year over year, with the former jumping to $5.44 billion and the latter to $5.49 billion.
Key to the increase in operating revenue was an 8% climb in patient care revenues, including a 2% rise in discharges and outpatient growth.
Meanwhile, costs swelled in large part due to wages going up by 9% and supplies and other expenses increasing 17%.
MGB also reiterated the "unrelenting capacity crisis" it continues to face, which it previously highlighted in its reporting of its fiscal year results. The capacity constraints are stemming from overcrowded emergency departments, causing the system's academic medical centers to treat more patients, reducing bed capacity, the MGB said.
More hospitals could be dealing with a bed shortage in the coming years, with the national hospital occupancy rate expected to reach 85% by 2032, according to a recent study published in JAMA Network Open.
New analysis by Chartis reveals how vulnerable rural hospitals are across the country, especially in certain states.
The number of rural hospitals in danger of closing is increasing, placing greater stress on the health of those communities.
Loss of access to care, combined with the decline in rural population health and growing "care deserts," is creating an unstable ground for rural hospitals to operate on, according to a report by Chartis.
The study found that 46% of rural hospitals are in the red, while 432 facilities are at risk of closure. In comparison, the advisory firm's research from a year ago reported that 50% of rural hospitals were losing money and 418 locations were teetering on closing.
While the national median operating margin for rural hospitals is 1%, that figure is negative within 16 states, the report stated. States with the highest percentage of rural hospitals in the red are Connecticut (100%), Kansas (87%), Washington (76%), Oklahoma (70%), and Wyoming (70%).
There's also a significant discrepancy between states that have expanded Medicaid under the Affordable Care Act and that 10 states that haven't, the report highlighted. In expansion states, the median rural hospital operating is 1.5% and 43% of hospitals are in a deficit. In non-expansion states, which represent nearly 30% of all rural hospitals, the median operating margin is -1.5% and over half of hospitals are in the red (53%).
Overall, 182 rural hospitals since 2010 have either closed or converted to a model that does not provide inpatient care, including hospitals that switched to a long-term care model or a Rural Emergency Hospital designation.
Even when rural hospitals continue to offer inpatient care, it's often with reduced services. For example, the analysis found that between 2011 and 2023, 293 rural hospitals stopped providing obstetrics, which accounts for 24% of the country's rural OB units.
Rural hospitals are more susceptible to policies like reimbursement cuts, the study noted. According to the research, the 2% cut in Medicare reimbursement under sequestration will cost rural hospitals more than $509 million this year and result in over 8,000 jobs lost.
"Our analysis of population health domains indicates that rural hospitals will be challenged to meet the needs of vulnerable communities in the years ahead," Michael Topchik, executive director for The Chartis Center for Rural Health, said in the report.
However, researchers also pointed to programs and initiatives that are improving the viability of rural hospitals.
The Innovation for Maternal Health Outcomes in Minnesota " is improving outcomes in communities experiencing the highest rates of disparities, including rural communities," while the University of Rochester Medical Center's launch of telehealth stations in banks has improved access to care.
Saum Sutaria told investors that the organization has "differentiated" itself from its peers, allowing it to better navigate the regulatory climate.
Tenet Healthcare's leadership believes the hospital operator is prepared to deal with policy changes that could be coming from Washington.
CEO Saum Sutaria spoke on a call with investors after the health system reported its fourth quarter and year-end earnings, expressing some optimism that Tenet's portfolio realignment has it in a better position to handle regulatory headwinds.
Tenet recorded $3.2 billion in net profit for 2024, compared to $611 million in 2023, while bringing $20.7 billion in net operating revenue. The company called the full-year financial performance "outstanding."
On the earnings call, Sutaria stated that the system continued to shift its portfolio by selling 14 hospitals and adding nearly 70 ambulatory surgical centers in 2024. Tenet plans to invest approximately $250 million each year towards the ambulatory space and expects to add 10 to 12 centers in 2025.
By moving its focus away from hospitals and towards the ambulatory surgery center (ASC) business, the system is likely to be less impacted by changes like site-neutral payments, Sutaria noted.
"We have demonstrated an ability to perform well in a variety of operating environments, and believe we are differentiated from our peer set as we navigate potential changes going forward," Sutaria said. "For example, our ASCs operate with freestanding ASC rates, which insulates that important part of our business from potential changes in site neutrality rules."
Meanwhile, Tenet's ASC business, United Surgical Partners International (USPI), has minimal exposure to Medicaid, putting it at less risk of being significantly affected by Medicaid reimbursement rate cuts or other alterations to the program, according to Sutaria.
"So, from a USPI perspective, this is all about an important tailwind of moving things into a lower-cost setting in an expensive portion of the care industry, which is surgical care, and doing so in a way where we're constantly increasing the acuity of the work at USPI because it creates more value for the purchaser," he said.
Though Sutaria recognized that Medicaid policies will have a greater impact on the hospital side, he stated that restructuring the acute care businesses in anticipation of changes would not be the right move.
Rather, Sutaria stressed the importance of advocating for Medicaid and how it improves access to care, so federal and state regulators feel compelled to preserve it.
Issues that the government has over Medicaid, such as fraud and abuse, were also likely helped by the Medicaid redetermination process, Sutaria highlighted.
"I think one thing that people may find is that Medicaid redeterminations over the last couple of years have probably done a lot to reduce the number of people eligible or not eligible who happen to be on Medicaid," he said. "So no way to predict for sure, but I'm somewhat comforted by the fact that some of that work has already been done through this redetermination process."
Changes in the hospitalization rate or staffed hospital bed supply are needed to avoid reaching concerning thresholds, a new study finds.
Hospital occupancy rates may be trending in a dangerous direction as healthcare is tasked with caring for an aging population in the coming years.
The average US hospital occupancy rate is 11% higher after the pandemic and without changes to the hospitalization rate or staffed hospital bed supply, that figure could grow to the point hospitals experience a bed shortage, according to a study published in JAMA Network Open.
Researchers highlighted that the mean hospital occupancy jumped from 63.9% between 2009 and 2019 to 75.3% between May 2023 and April 2024. The rise in occupancy was mostly driven by a 16% decrease in the number of staffed hospital beds, resulting in a drop from the steady state of 802,000 beds between 2009 and 2019 to 674,000 between May 2023 and April 2024.
Unless staffed hospital bed supply increases by 10%, hospitalization rate reduces by 10%, or some combination of the two occurs, the study's findings show that the national hospital occupancy could reach 85% as soon as 2032, with some states likely hitting that mark sooner. A national hospital occupancy of 85% would constitute a bed shortage.
As the American population gets older, more hospitalizations are expected to occur to care for adults with chronic and complex illnesses.
"I've been doing this for almost 40 years now and I've been hearing about how everybody's going to be cared for at home and we don't need hospital beds anymore, but I've got 100 people holding in my ED that tell me very differently about what their needs are and how they're going to be cared for," Amy Mansue, Inspira Health president and CEO, recently told HealthLeaders.
"We underestimate the level of complexity that comes from caring for people who have chronic illnesses, so while it seems like a simple pneumonia or a simple whatever, when you've got COPD and everything else added in that bucket, it requires a tremendous amount of care and people can't do that on their own."
How CEOs are strategizing
To deal with higher occupancy rates, hospital and health system leaders are utilizing M&A, particularly on the outpatient side.
By offering outpatient services, organizations can cut down on expenses, reach more patients in need of care, and free up hospital beds.
Kaufman Hall's latest National Hospital Flash Reportrevealed that the increase in outpatient revenue per calendar day outpaced the rise in inpatient revenue per calendar day in 2024 versus 2023, 9% to 8%, respectively.
"Driving the cost down is very, very important and when you can treat a patient in an ambulatory setting or even through population health and public health, you can try and manage illness and well-being before it becomes an acute issue," Ed Banos, University Health president and CEO, said in HealthLeaders' The Winning Edge for Transforming Through M&A.
Outpatient investment alone, however, won't solve the problem of hospitals not having enough beds. That's why organizations are also looking at ways to expand their inpatient sites of care through expansion and integration.
"It was a little surprising for us as we were heavily for years pushing to the outpatient market as everybody's talked about and now we're finding that the aging population is starting to overwhelm people's perspectives of how many beds are needed and we're actually having to try to catch up on that," Matthew Heywood, Aspirus Health president and CEO, said.
