Quorum Health posts 2016 losses, plans to divest six more hospitals
Quorum Health reported a loss of $90.7 million during the fourth quarter of 2016, according to a new SEC filing. The health system reported net operating revenues of $515.2 million for the final three months of 2016, compared to $558.2 million net operating revenues during the same period in 2015.
Adjusted earnings before interest, tax, depreciation, and amortization was $30.7 million in the final quarter of 2016, which is much lower than the $77.7 million in the final quarter of 2015.
Adjusted earnings for the entire year was $162.9 million, compared to $263.7 million in 2015.
Officials from Quorum Health, the Brentwood, Tenn.-based health system that owns 36 hospitals in rural and mid-sized markets across 16 states, are disappointed with the figures but said the system has made “significant progress” in a few areas. They have worked to restructure their hospital portfolio, refine operations and add access to care since the spin-off from CHS.
Thomas D. Miller, president and chief executive officer of Quorum Health Corporation, suggested reasons for the disappointing numbers, including legal, professional, and settlement costs; net loss on the sale of two hospitals; transaction costs associated with the CHS spin-off; and severance costs after the spin-off.
Quorum Health sold two hospitals in the fourth quarter, which hospital officials said represented about $19 million of negative adjusted earnings from 2016. The system hopes to shed six more hospitals this year and is looking at other hospitals with negative or low single-digit margins as possible divesting options.
“We expect to complete the resulting transactions from this group over the next twelve months, and we estimate cash proceeds from these transactions to be approximately $200 million, all of which will be used to reduce our secured debt,” said Miller.
Quorum isn’t the only system looking to cut hospitals. Quorum’s former parent company, CHS, is also looking to divest more than 25 hospitals in 2017.
Looking forward, Miller said Quorum has implemented cost-reducing initiatives in 2017 “to better align our expenses to our volumes,” including an improved collection cycle and increased local access to care. Miller said Quorum started 43 physician practices in the fourth quarter and plans to add another 32 practices to the system in the first part of 2017.
“We continue to position our hospitals for additional outpatient growth and to expand needed services. With these efforts, as well as other earnings driving initiatives, we remain focused on improving operations, reducing leverage and increasing access and the quality of care we provide in our hospitals,” he said.
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