First-quarter net losses swelled to $98.5 million, more than tripling the $27.2 million loss reported a year earlier.
Quorum Health has sold or closed 10 hospitals since it spun off from Community Health Systems, with 38 hospitals, two years ago.
That spree of divestitures is primarily to blame for a dramatic drop in net operating revenues, the company said Wednesday in announcing its quarterly financial performance. Quorum's net losses tripled to $98.5 million in the first quarter ended March 31 from $27.2 million a year earlier.
Quorum, based in Brentwood, Tennessee, has collected $84.8 million in net proceeds from its divestitures, and it plans to collect another $165-215 million in divestiture proceeds by the end of next year, having already signed letters of intent to divest seven more facilities, the company said.
But the costs associated with getting rid of hospitals can add up. Quorum has incurred tens of millions of dollars in expenses associated with these divestitures, as the company noted in a filing with the Securities and Exchange Commission on Thursday.
Closing costs: Shutting down Affinity Medical Center in Massillon, Ohio, in February has already cost Quorum $13.7 million, including $7.4 million in severance pay and salary continuation costs, the company said. Before the end of 2018, the closure is expected to cost another $2.5-3.5 million to complete wind-down processes and asset transfers to the city.
Health records maintenance: Quorum noted that it's obligated to maintain Affinity health records for about 19 years at an estimated cost of $300,000 per year.
Other divestitures: In a separate SEC filing, Quorum listed two other Q1 divestitures. The company sold its 77-bed Clearview Regional Medical Center and affiliated facilities in Monroe, Georgia, on March 31 for $37.4 million. The company sold its 70-bed Vista Medical Center West and affiliated facilities in Waukegan, Illinois, for $1.2 million on March 1.
Ongoing CHS dispute: In addition to its hospital-selling spree, Quorum is also dealing with a dispute over transition services agreements it signed with CHS as part of the spin-off arrangements in April 2016. The agreements involved Quorum paying CHS for certain services, including accounts receivable collections, information technology, and payroll processing. The dispute, which Quorum says involves a disputed bill of about $10.6 million, is pending in arbitration, with hearings scheduled June 18-29.
Why the CHS dispute matters: "Terminating or transitioning the services provided by the transition services agreements with CHS could result in additional costs and a risk of operational problems, delays in collections from payors, potential errors and possible control issues during the termination and transition processes, any of which could adversely affect our business, results of operations, financial condition and cash flows," Quorum said.
Amid this turmoil, Quorum President and CEO Thomas D. Miller made 34% less last yearthan he did in 2016.
The tentative plan was outlined broadly as part of an item in the updated Unified Agenda.
The Health and Human Services Office of the National Coordinator for Health IT (ONC) signaled this week that it plans to publish a new certification rule this fall pertaining to data interoperability and related matters.
The plan, which is tentatively slated to be carried out in September, was outlined as part of an ONC item in the Trump administration's updated Unified Agenda released Wednesday.
What to expect: The rule is expected to address a number of health IT items, including certification requirements for developers, voluntary certification for pediatric healthcare providers, trusted exchange frameworks for network-to-network data exchange, information blocking, and other "complementary means" to advance certification and interoperability.
Opportunities: The pediatric healthcare item could be used to make electronic health records safer and more effective "for the youngest and often most vulnerable patients," pediatrician Josh Rising, MD, who directs healthcare programs for The Pew Charitable Trusts, and Ben Moscovitch, who manages Pew's health IT project, wrote in an opinion piece last month for The Hill.
Highly anticipated: Whether and how the rule addresses information blocking—which ONC defines as occurring when "persons or entities knowingly and unreasonably interfere with the exchange or use of electronic health information"—is likely to be one of the more closely watched elements of the rule.
Surprises possible: In a tweet, Moscovitch noted that it "[w]ill be interesting to see what those 'other complementary means' include."
Legal basis: The rulemaking process would aim to implement certain provisions of the 21st Century Cures Act.
Success stories: The HHS ONC is hosting an "Interoperability Proving Ground" platform where stakeholders can share their interoperability projects.
An earlier version of the plan had it slated to be carried out last month.
The change reverts to a 50/50 blended rate calculation from 2016 in an effort to stabilize rural supplier markets.
Citing concerns that durable medical equipment suppliers in rural areas are closing down, the Centers for Medicare & Medicaid Services released an interim final rule Wednesday to halt rate adjustments that had been putting pressure on some of these suppliers.
The change will take effect June 1 and last through the end of the year, temporarily reinstating an older rate adjustment calculation, the agency said.
"This action will help Medicare beneficiaries in rural areas continue to access life-sustaining durable medical equipment, like oxygen equipment," CMS Administrator Seema Verma said in the written announcement.
The week's theme: This announcement comes a day after CMS debuted its new Rural Health Strategy to promote quality and affordable healthcare for 60 million Americans in less-populated areas.
What's affected: The interim final rule applies to certain durable medical equipment (DME) and feeding tube supplies provided in rural areas and non-contiguous areas (such as Hawaii, Alaska, and the U.S. territories) that are not subject to the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies Competitive Bidding Program (DMEPOS CBP).
The change: There was a transitional year in 2016, when Medicare calculated payments for certain supplies in the affected areas by blending competitive bid rates with the traditional fee schedule amounts (50/50 blended rates). Beginning in 2017, the fully adjusted fee schedule took effect, significantly reducing reimbursements, CMS said. The change announced Wednesday reverts to the 50/50 blending formula until the end of 2018.
The rates: Returning to the blended calculation will increase reimbursements anywhere from 30% to 231% depending on the DMEPOS item. A table of state averages is included in a fact sheet.
More to come in 2019: The agency noted that it intends to address these rates with a subsequent round of notice-and-comment rulemaking for 2019 and the years to follow.
How much it will cost: Making this change will cost $290 million in Medicare benefit payments and $70 million in Medicare beneficiary cost-sharing, according to CMS estimates. Medicaid pays the cost sharing for dual eligible beneficiaries, with $10 million to come from the federal government and another $10 million to come from the states.
Measuring the benefit: "We are unable to quantify the benefits of this interim final rule with comment period at this time; however, the goal of this interim final rule," CMS wrote in the rule, "is to preserve beneficiary access to DME items and services in rural and non-contiguous areas not subject to the CBP during a transition period in which CMS will continue to study the impact of the change in payment rates on access to items and services in these areas."
Decline in suppliers: The number of supplier locations providing relevant items and services in the affected areas declined 7%, from 13,535 to 12,617, in 2016, the agency wrote in its interim final rule. "We are concerned that national chain suppliers of oxygen may close locations in more remote areas if the rate they are paid for furnishing items in a market where the volume of services is low does not justify the overhead expenses of retaining the locations," the agency wrote.
Notice-and-comment waived: The agency exercised its discretion to waive a formal notice-and-comment rulemaking processing, opting instead to move forward with an interim final rule, with a comment period. Some suppliers are shutting down as a result of the adjustments that took effect January 1, 2017; delaying any longer could risk further harm to rural markets, the agency said.
Stakeholders are encouraged to comment on the interim final rule until 5 p.m. July 9.
Editor's note: This story was updated Thursday, May 10, to include additional information.
The HHS secretary emphasized the hospital's shifting role in a value-based healthcare delivery system.
Health and Human Services Secretary Alex Azar reassured the American Hospital Association on Wednesday morning that—despite some sobering headlines that suggest otherwise—hospitals are not growing less important to the U.S. healthcare system.
Rather, the role hospitals play is shifting as the healthcare delivery system transforms, Azar said in his speech emphasizing the administration's push toward a value-based system.
"The tale of increasing hospital irrelevance is not borne out in all the data," Azar said in his prepared remarks.
"Large-scale hospitals, and especially overnight stays, are taking on more of a specialized role within our system. But hospitals, broadly defined, aren't growing irrelevant."
Sobering headlines: Azar specifically cited Ezekiel J. Emanuel's op-ed in The New York Times last February, "Are Hospitals Becoming Obsolete?" which begins with the alarming line, "Hospitals are disappearing." Azar acknowledged that the number of U.S. hospitals has declined significantly in the past few decades and that Emanuel's piece identified several factors that have contributed to this decline. But the story is "incomplete," Azar said.
Trending spending: Although the number of hospitals has declined in recent decades, the relative amount of money being spent for hospital-based care has not, Azar said. In 1960, Americans made 32.4% of their health expenditures on hospital charges; that figure rose slightly to 33% in 2016, he said, citing National Health Expenditure data.
Price and quality transparency: "Knowing prices and outcomes can enable every American to find better, cheaper healthcare. … We know, empirically, that when we empower healthcare consumers, market forces work," Azar said, describing a study of "more than 500,000 patientswhose employers built a price transparency platform" to reduce costs.
Publishing chargemaster: Hospitals will be required to post a list of their standard charges online in a machine-readable format beginning in January, Azar noted, harkening back to the IPPS proposal released last month. "I believe you ought to have the right to know what a procedure is going to cost, and what it's going to cost you, out of pocket—before you get it," he added. "We want your input on the best way to make this a reality, and we will applaud those who make this vision a reality on their own."
Government burdens: "We are mindful of how they could be driving consolidation in the marketplace. As a matter of principle, we want to move to a system where our regulations and payment systems are agnostic about ownership structures. Economics and competition should drive markets, not us."
Prescription drug pricing: Azar said the HHS blueprint to address the problem of high prices is part of the Trump administration's 2019 budget proposal. "As you likely know, the President will be delivering a speech on this topic on Friday, so stay tuned," he added.
The AHA published a video of Azar's full speech, which is included below:
Editor's note: This story was updated Thursday, May 10, to include a video of Azar's speech.
The governor expressed pride in gaining approval for the fourth and 'most robust work requirement in the nation.'
In a decision praised by Gov. Chris Sununu as "a transformative step towards a more thriving workforce," state and federal officials announced Monday afternoon that New Hampshire is the fourth state to be granted a waiver to impose work requirements on certain Medicaid beneficiaries.
Sununu, a Republican, said the change will both control Medicaid program costs and help to lift people out of poverty by encouraging them to gain skills for personal independence.
"We are committed to helping more people get into the workforce, as it is critical not only for individuals but also for our economy as a whole," Sununu said in a statement, thanking Centers for Medicare & Medicaid Services Administrator Seema Verma and lauding New Hampshire's policy as "the most robust work requirement in the nation."
New Hampshire Department of Health and Human Services Commissioner Jeff Meyers said the so-called "community engagement requirement" will help improve the lives of Medicaid beneficiaries in the state.
The waiver is in effect from Monday through the end of 2018, according to an approval letter released by Sununu's office.
Whether the feds would approve New Hampshire's waiver request has been a contentious question for some time in the state, as The Concord Monitor's Ethan DeWitt reported. Since the state expanded its Medicaid program in 2014, Republicans have pushed for a work requirement.
State lawmakers had passed a measure that would have shuttered the program if the federal government didn't approve the waiver by April 30, 2018, a deadline that was bumped back earlier this year to May 30, 2018, as the Monitor reported.
The states to secure waivers for work requirements before New Hampshire were Kentucky, Indiana, and Arkansas, each of which had expanded Medicaid coverage under the Affordable Care Act. The work requirements would apply only to beneficiaries who gained coverage under the expansion, as Kaiser Health News reported.
Editor's note: This story was updated Tuesday, May 8, to include additional information.
The three-year coverage limit Kansas had sought for some Medicaid beneficiaries could threaten the program's 'safety net' status, the CMS head warned.
Centers for Medicare & Medicaid Services Administrator Seema Verma said Kansas will not be allowed to impose a lifetime limit on Medicaid benefits for some beneficiaries as it had requested.
The state, which was among at least five states—including Arizona, Utah, Maine, and Wisconsin—seeking a waiver for permission to impose such a cap, had pushed the idea of a three-year coverage limit. But that could undermine Medicaid's "safety net" status, Verma said Monday.
"We seek to create a pathway out of poverty, but we also understand that people’s circumstances change, and we must ensure that our programs are sustainable and available to them when they need and qualify for them," Verma said in her prepared remarks for a speech before the American Hospital Association annual membership meeting.
For the first time in U.S. history, Verma noted, the federal government is allowing states to establish Medicaid work requirements, which the Trump administration prefers to call "community engagement requirements," for beneficiaries deemed to be able-bodied.
Three states had been granted waivers for their Medicaid work requirements as of Monday morning—Kentucky, Indiana, and Arkansas—with a fourth expected to be announced within the week, Verma said in her speech.
At least six additional states have waiver applications pending.
Each of the states that have secured waivers for work requirements thus far expanded Medicaid coverage under the Affordable Care Act, and the work requirements would apply only to those beneficiaries in this category, as Kaiser Health News reported.
Verma notified Jon Hamdorf, acting Medicaid director for Kansas, of the decision in a letter Monday: "While we continue to review the state's proposal, we have determined that we will not approve this formulation of the state's request to impose a lifetime limit on Medicaid benefits for individuals who are eligible for Medicaid."
Additionally, Native American leaders have argued the Trump administration would be reversing longstanding protections if it denies the tribes' request for an exemption from the Medicaid work requirements. The administration argues granting such an exemption would constitute illegal race-based preference.
Verma addressed this concern in her speech, suggesting that the task of protecting native groups should be the states' responsibility.
"We believe we can give states flexibility and discretion to implement the community engagement requirements with respect to local tribal members," she said. "We look forward to working with states and tribes to try to help them achieve their goals and determine how to best apply community engagement to serve their populations."
Despite praising CMS for its decision on Kansas' request, some advocacy groups argued the administration's position on tribal healthcare contradicts federal law.
"Tribes have their own governments and health systems that, by statute and treaty, have a direct government-to-government relationship with the United States. States are legally forbidden to impose Medicaid premiums or any other Medicaid cost-sharing on American Indians and Alaska Natives enrolled in Medicaid," said Eliot Fishman, senior director of health policy for Families USA, in a statement calling state efforts to impose Medicaid work requirements "foolish and self-destructive."
"If states can’t impose premiums or cost-sharing on tribal governments," he added, "they can’t impose waivers that take coverage away entirely."
Editor's note: This story was updated on Tuesday, May 8, to include additional information.
The company's leadership had urged investors to vote against the idea, saying it is unnecessary and not in its best interest.
A trust fund holding a small number of Tenet Healthcare Corp. shares had proposed to require the company to select a board chairperson who has never served as an executive officer for the company, but shareholders voted overwhelmingly against the idea.
As rationale for the proposal, the trust fund had cited the abrupt resignations of two directors last August, followed by the departure last October of Tenet's then-Chairman and CEO Trevor Fetter.
"In our view, there would be far less leadership and governance uncertainty if the Company had maintained the independent board chairman structure it had prior to 2015," the proposal stated.
"We also believe that given the Company’s history of regulatory challenges and the policy uncertainties facing healthcare services companies, it would be judicious to commit to appointing an independent chairman."
In advance of Tenet's annual shareholder meeting last Thursday, the company had urged its investors to oppose the proposal, arguing that the board's leadership structure is already independent and consistent with standard industry practice.
Shareholder proposal shot down: Investors holding more than 15.6 million Tenet shares voted in favor of the proposal, but investors holding nearly 65.9 million shares voted against it, the company reported Monday in a filing to the Securities and Exchange Commission.
Chairman and CEO reelected: More than 79.1 million shares voted in favor of reelecting CEO Ronald A. Rittenmeyer as executive chairman, a position to which he was named last August. Rittenmeyer was named CEO when Fetter's departure was announced in October.
Industry norm: Citing the 2017 Spencer Stuart Board Index, Tenet noted that 72% of S&P 500 companies do not have an independent chairperson.
Current directors: Tenet noted, also, that 11 of its 12 current directors "satisfy the independence standards" of the New York Stock Exchange and Tenet government policies.
The trust fund: The defeated shareholder proposal was proffered by the Graphic Communications Conference IBT Benevolent Trust Fund U.S., based in Washington, D.C., which said it holds 435 shares of Tenet common stock.
A high-ranking Center for Medicare employee passed information about internal deliberations regarding coverage and reimbursement decisions to 'his close friend and former CMS colleague.'
Two people who worked for the Centers for Medicare & Medicaid Services were among four defendants convicted of conspiring to steal nonpublic government information and pass it along to healthcare investors, the Department of Justice announced Friday.
The information at issue in this case was "highly sensitive and confidential," Deputy U.S. Attorney Robert Khuzami said in a statement announcing the result of the four-week trial in the U.S. District Court for the Southern District of New York.
"Trading on confidential nonpublic government information is just as illegal as trading on corporate insider information," Khuzami said. "Our Office is committed to policing and prosecuting both."
Christopher Worrall, 40, of Linthicum Heights, Maryland—who was arrested a year ago—was a special assistant and senior technical adviser in the director's office of the CMS Center for Medicare, where he served as project manager for an internal data management system with the agency's most-current claims data, according to court records.
Worrall was convicted on two charges: wire fraud and conversion of U.S. government property, both for actions he took in 2012.
Worrall passed information to "his close friend and former CMS colleague" David Blaszczak, 42, of Isle of Palms, South Carolina, a political intelligence consultant who had worked as a CMS special assistant and health insurance specialist, according to the superseding indictment.
Blaszczak, acting as a consultant, then passed the CMS information along to investors with Deerfield Management Company, including defendants Theodore Huber, 56, of Westport, Connecticut, and Robert Olan, 47, of Rumson, New Jersey, partners and analysts for the firm.
Blaszczak also passed information to former Deerfield partner and analyst Jordan Fogel, who pleaded guilty then cooperated with the prosecution of his former colleagues, according to the DOJ's statement.
Deerfield used the CMS data to earn more than $7 million in profits, the DOJ said.
A separate action filed by the Securities and Exchange Commission was put on pause while the criminal case proceeded.
Trade group fighting two fronts in the contentious debate over drug pricing.
Mark Merritt, president and chief executive officer of the Pharmaceutical Care Management Association, will step aside at the end of the year, after 15 years on the job, the trade group announced Monday morning.
The news of Merritt's departure comes as pharmacy benefit managers (PBM), which PCMA represents, feel increasing pressure from the government and private industry alike.
"We deeply appreciate his leadership guiding PCMA during a time when our industry grew and evolved dramatically amidst a political period often dominated by contentious health care debates," the group's board chairman Express Scripts President and CEO Tim Wentworth said in a statement.
"I am pleased that Mark has shared his decision now and will stay on and help ensure a smooth transition as we work to build on PCMA's successes and launch a search for his successor."
Government pressure: Health and Human Services Secretary Alex Azar and Food and Drug Administration Commissioner Scott Gottlieb, MD, have each delivered incisive speeches with strong words directed at health plans and PBMs, criticizing a lack of transparency around their drug pricing and rebating contracts.
Industry pressure: While PBMs are pushed by the government on one front, they're fighting a second front with private industry, enduring criticism from the pharmaceutical industry and a series of major mergers with insurers. St. Louis–based insurer Cigna announced plans in Marchto buy Express Scripts for about $52 billion, after CVS Health announced plans in December to buy insurer Aetna.
More aggressive? PCMA's member organizations have become frustrated with the trade group and hope to push it toward "a more aggressive public posture," Axios' Sam Baker reports.
Market analysts have noted that the pressures on PBMs mean it's unclear whether the standalone PBM modelwill survive.
The 'very large or indeterminate damages sought in some of these matters' could affect the company's bottom line.
In a quarterly filing to the Securities and Exchange Commission on Wednesday, Community Health Systems outlined a long list of the legal proceedings in which the company is currently involved.
Although an organization as large as CHS is bound to be wrapped up in multiple legal matters at any given time—and being involved in a proceeding does not imply wrongdoing—the length of this list goes to show how entangled in controversy the company has become.
In its filing, CHS notes that state regulators, state Medicaid fraud-control units, the Centers for Medicare & Medicaid Services, the Department of Justice, and other authorities send it inquiries or subpoenas on occasion.
"In addition to the matters discussed below," the filing states, "we are currently responding to subpoenas and administrative demands concerning" the following:
certain cardiology procedures, medical records and policies at a New Mexico hospital,
an inquiry regarding sleep labs at two Louisiana hospitals,
a subpoena regarding wound care services at one of our Florida hospitals (which appears to be related to unsealed cases against Healogics, Inc.),
a civil investigative demand concerning short-term Medicaid eligibility determinations processed by third party vendors at one of our Pennsylvania hospitals and
certain cardiology procedures, medical records and quality assurance committee meeting minutes at a Tennessee hospital.
Additionally, CHS notes that it is subject to other claims and lawsuits pertaining to its ordinary business.
"Based on current knowledge, management does not believe that loss contingencies arising from pending legal, regulatory and governmental matters, including the matters described herein, will have a material adverse effect on the consolidated financial position or liquidity of the Company," the filing states.
"However, in light of the inherent uncertainties involved in pending legal, regulatory and governmental matters, some of which are beyond our control, and the very large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to our results of operations or cash flows for any particular reporting period."
Excluding medical malpractice, general liability, and employment claims, the filing lists a number of specific legal proceedings, including the following:
Class action shareholder federal securities cases: Three class action cases were filed in the U.S. District Court for the Middle District of Tennessee, alleging that those who bought CHS common stock between July 27, 2006, and April 11, 2011, were harmed by misleading statements that artificially inflated the price of CHS stock. The cases were consolidated in 2011; the company's motion to dismiss was granted in 2016; and the plaintiffs appealed to the Sixth Circuit, which reversed the lower court's dismissal in 2017. Last month, the company asked the U.S. Supreme Court to review the Sixth Circuit's decision.
Independent lab billing: A hospital in Dothan, Alabama, received a civil investigative demand (CID) in 2015 from the DOJ for information about whether the facility qualifies as a covered hospital under certain lab bill regulations.
Florida low-income pool program: A hospital in St. Petersburg, Florida, received a CID from the DOJ last September seeking information about its participation in the Florida Low Income Pool Program, which helps cover uncompensated care. The CID pertains to agreements between the hospital and Pinellas County.
Former CFO's lawsuit: Becker v. Community Health Systems, Inc., was filed in 2012 by a former chief financial officer at Rockwood Clinic in Spokane, Washington. It alleges wrongful termination. The plaintiff was awarded about $1.9 million in 2016, but the company has appealed.
Cyberattack: As previously disclosed, the CHS computer network was targeted by "an external, criminal cyber-attack" in 2014. The incident prompted multiple purported class action lawsuits that allege sensitive patient information was inadequately protected. "At this time, we are unable to predict the outcome of this litigation or determine the potential impact, if any, that could result from this litigation," the filing states, "but we intend to vigorously defend these lawsuits."
Charity care allegations: Empire Health Foundation sued CHS in Spokane, Washington, in 2017, accusing the company's Deaconess and Valley Hospitals of failing to meet its charity care obligations under the terms of a 2008 asset purchase agreement. "We believe these claims are without merit and will vigorously defend the case," the filing states.
Arkansas payer contracts: A purported class action lawsuit filed in the U.S. District Court for the Western District of Arkansas in 2015, claims CHS-affiliated Arkansas hospitals violated payer contracts. The court certified the claimants as a class, and CHS reached a tentative settlement. (The company faces similar allegations in at least two other states.)
Quorum: A purported class action lawsuit that seeks to represent Quorum Health Corporation shareholders alleges that CHS violated federal securities laws by failing "to record a goodwill and long-lived asset impairment charge against QHC at the time of the spin-off." Last month, a federal judge denied all defendants' motions to dismiss.
R2 Investments: An investment firm sued both CHS and Quorum Health Corporation in Tennessee court last fall, alleging common law fraud and state law violations.
Microsoft: The software giant sued CHS in the U.S. District Court for the Middle District of Tennessee in March, alleging willful copyright infringement and other misdeeds pertaining to the continued use of Microsoft products following CHS divestitures. CHS' response to the complaint is due this Monday.