Local hospitals face industry challenges
By Kevin McKenzie, The Commercial Appeal, Memphis, Tenn. | |
McClatchy-Tribune Information Services |
But the outlook for the entire nonprofit hospital industry -- where factors ranging from
"It is a much more uncertain future than we've ever faced in the past," said
S&P in July lowered its long-term rating on Baptist's bond debt to an "A," still indicating a "strong capacity" to meet commitments, but a step down from an "AA-" level defined as "very strong capacity."
The credit downgrade will raise the system's debt cost by about
"We're in an environment where costs keep rising and reimbursement seems to stay the same or actually drop, and so that puts financial challenges on all hospitals," Pounds said.
At Methodist, S&P maintained an "A+" rating for the eight-hospital, 12,000-associate system.
While S&P analysts praised Methodist for consistently generating operating surpluses in recent years, including
Last spring, Methodist reduced its expenses by
A big part of Methodist's strategy is to generate savings by improving care and making it more efficient, while shaving costs such as supplies and utilities, McLean said. The system would rather avoid further layoffs "at all costs," relying on employee turnover to adjust staffing, he said.
A drop in malpractice costs noted by S&P analysts provides one example. McLean said that with a focus on quality and service, Methodist decided several years ago to self-disclose to patients and families when something goes wrong, identify problems and make improvements.
"Our goal is to understand that, quite frankly, we're producing a product that society is having trouble paying for, be it the government, major employers, or individuals," he said. "So one of the things we're trying to do on an ongoing basis is find ways to deliver care at the same level of quality and the same level of service more efficiently."
At Baptist, it was the second credit downgrade since
Baptist's downgrade hinged on widening, higher-than-expected operating losses , according to S&P's analysis. The system had losses of
For the first seven months of its current fiscal year, through April, Baptist showed a loss of about
A year ago, Baptist cut about 50 positions, but most of those vacant, Pounds said.
Health care consultants from
With a new chief executive officer,
"What we're going to do is look at our length of stay, try to reduce it and reduce costs and try to look at some additional revenue streams," Pounds said. "We're doing all of that to turn that operating loss into an operating margin."
-----------------
Creditworthy hospitals
Standard & Poor's Rating Services credit profiles of nonprofit
Some highlights from July report:
Baptist
About 54% of revenue comes from
About 12% of revenue comes from
Quote: "Although we take a negative view of (Baptist's) lack of progress in improving operations, we favorably view management's ongoing efforts to sustain the benefits of the
Methodist
About 22 percent of revenue comes from TennCare,
Quote: "The challenges Methodist faces in a competitive market, uncertainty surrounding future reimbursement under health reform and a financial profile that is not consistent with high investment-grade (AA category) credit -- especially balance sheet metrics and significant reliance on TennCare funding and disproportionate share payments -- offset a positive outlook or a higher rating at the current time.
___
(c)2014 The Commercial Appeal (Memphis, Tenn.)
Visit The Commercial Appeal (Memphis, Tenn.) at www.commercialappeal.com
Distributed by MCT Information Services
Wordcount: | 915 |
NuGrowth Gives Back to the Community
Suddenly Single: Loss Of Spouse Can Bring Financial Changes
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News