Catholic Health Initiatives is including its $483 million operating loss in its merger plans with Dignity Health.
CHI says the losses were due to “lower patient volumes, higher labor costs, increased pharmacy prices, and reduced reimbursement in Medicare and Medicaid,” according to a Modern Healthcare report.
- S&P Global Ratings has recently downgraded Catholic Health’s credit ratings and warned that another downgrade could be issued due to lackluster financial performance, the Denver Business Journal reports.
Revenues for the nonprofit health system with 103 hospitals in 17 states increased 7.4% from $14.8 billion in 2015 to $15.9 billion in 2016. However, expenses rose 10.2% over the same time to $16.1 billion from $14.6 billion in the previous year. Losses occurred even though the struggling health system has laid off workers, sold off $600 million in real estate, and stepped back from its failed health plan.
Ratings agencies have begun to affect CHI for its poor financial performance. Back in April, S&P Global Ratings reduced CHI’s long-term and underlying ratings from “A” to “A-minus” and the rating agency put that rating on CreditWatch on Tuesday, according to the Denver Business Journal.
An aggressive growth strategy was driving losses at CHI.
Consolidation isn’t working out for some health systems with large networks of hospitals. Community Health Systems, for example, has faltered since its 2014 purchase of Health Management Associates and could sell up to 38 of its hospitals by the end of 2017 to reduce debt. Like CHS, CHI has recently racked up large amounts of debt. Its annual report declared more than $9 billion in total debt obligations.