Hospital filings offer a look at LifePoint

Feb. 10--Quarterly meeting transcripts and documents filed with the Securities and Exchange Commission offer a glimpse of the LifePoint Hospitals business strategy.

LifePoint and Duke created their joint venture in 2011 with a 97 percent ownership stake by LifePoint and 3 percent by Duke.

Company leaders haven't discussed the financial breakdown with The Times but did say LifePoint is managing partner of the venture, and Duke is a major player at the table regardless of the numbers.

The annual report filing listed the risk factors the company faces.

"We may have difficulty acquiring hospitals on favorable terms," the report said.

It noted in recent years that the legislatures and attorneys general of several states have become more interested in sales of hospitals by tax-exempt entities.

"This heightened scrutiny may increase the cost and difficulty, or prevent the completion, of transactions with tax-exempt organizations in the future," the report said. "We may be unable to timely and effectively integrate any hospitals that we acquire with our ongoing operations. We may experience delays in implementing operating procedures and systems in newly acquired hospitals. Integrating an acquired hospital could be expensive and time consuming and could disrupt our ongoing business, negatively affect cash flow and distract management and other key personnel."

The report clearly states the company believes in investing in technological upgrades at its facilities. In addition, the risk factors are pretty much the same for all major health care companies.

"If we do not continually enhance our hospitals with the most recent technological advances in diagnostic and surgical equipment, our ability to maintain and expand our markets may be adversely affected," the report said. "Technological advances, including with respect to computer-assisted tomography scanner (CTs), magnetic resonance imaging (MRIs) and positron emission tomography scanner (PETs) equipment, continue to evolve. In addition, the manufacturers of such equipment often provide incentives to try to increase their sales, including providing favorable financing to higher credit risk organizations. In an effort to compete, we must continually assess our equipment needs and upgrade our equipment as a result of technological improvements. We believe that the direction of the patient flow correlates directly to the level and intensity of such diagnostic equipment."

The report notes the Duke LifePoint partnership, "which combines our operational resources and experience with Duke's expertise in the development of clinical services and quality systems, further strengthens our ability to acquire well-positioned hospitals."

The company had about 28,000 employees at the end of 2012 and 6,565 beds at the end of 2013.

"We believe that growth at our hospitals also is dependent in part on the quality of care provided in our facilities, adding new service lines in our existing markets and investing in new technologies desired by physicians and patients," the report said. "The quality (both actual and perceived) of health care services provided at our hospitals is an increasingly important factor to patients when deciding where to seek care, to physicians when deciding where to practice, and to governmental and private third-party payers when determining the reimbursement that is paid to our hospitals."

Focus areas for the company's business strategy include:

--Measurement and improvement of quality of patient care and perceptions of such quality in communities where hospitals are located;

--Targeted recruiting of primary care physicians and physicians in key specialties;

--Retention of physicians and efforts to improve physician satisfaction, including employing a greater number of primary care physicians as well as physicians in certain specialties;

--Retention and, where needed, recruitment of non-physician employees involved in patient care and efforts to improve employee satisfaction;

--Targeted investments in new technologies, new service lines and capital improvements at our facilities;

--Improvements in management of expenses and revenue cycle;

--Negotiation of improved reimbursement rates with non-governmental payers;

--Strategic growth through acquisition and integration of hospitals and other health-care facilities where valuations are attractive and the company can identify opportunities for improved financial performance through management or ownership; and

--Developing strategic partnerships with not-for-profit health care providers to achieve growth in new regions.

In effort to rein in costs, LifePoint struck agreements with a third party to provide certain non-clinical business functions, including payroll processing, supply chain management and revenue cycle functions.

"We believe this model of sharing centralized resources to support common business functions across multi-facility enterprises provides us efficiencies and is the most cost-effective approach to managing these non-clinical business functions," the report said. "We fully implemented our payroll processing function in 2011. We expect to complete the implementations of the supply chain management and revenue cycle functions by the end of 2014."

As LifePoint chairman and CEO, William F. Carpenter III made $8.96 million in fiscal year 2012 -- a 16 percent increase from $7.73 million he earned in 2011, according to a proxy disclosure filed with the U.S. Securities and Exchange Commission.

That total included his $978,192 salary, $4,053,792 stock awards, $2,435,320 option awards and $1,495,000 non-equity incentive plan compensation.

It's not unusual for CEOs of large for-profit health companies to receive large compensation packages. He ranks fifth overall for major for-profit, acute-care hospital company CEOs, according to Becker's Hospital Review.

In a recent quarterly meeting, Carpenter said the acquisition environment continues to be very active with a strong set of potential hospitals.

"We really think we are very well-positioned, both financially and alongside our quality partners to take advantage of this in what I believe is a differentiated way for LifePoint," Carpenter said. "We have good hospitals that are reaching out to us, and I appreciate the commitment to quality that we've shown in our financial and operational resources."

He talked about recent and potential acquisitions.

"Bell and Portage in the Upper Peninsula and Fauquier Health in Northern Virginia, all three really solid adds for us," Carpenter said. "Then, expected early in 2014, Wilson Medical and Rutherford Regional, both in North Carolina, both part of the Duke LifePoint partnership. These are really significant and very, very good hospitals, and we are very well pleased with those. So, the thing that's driving the acquisition pipeline these days seems to be, for the good hospitals that we are seeing, seems to be more along the need for scale, the need to be a part of something bigger. To be a part of something that is bringing the resources of a larger organization, one that's committed to quality. To help deal with the regulatory burdens that are coming out of Washington.

Those are the things, more than the financial needs. Although, they are significant for standalone rural hospitals. So, that's what we are seeing, and we are really pleased that we've been able to position the company in order to take advantage of that."

The 2012 annual report talked about the Duke LifePoint joint venture.

"Not only has our first-of-its-kind joint venture with Duke become an engine that helps propel our acquisition strategy, it has become a national model for transforming the delivery of care," the report said. "It is a model that will become increasingly important and valuable given the focus of health care reform to improve the quality and reduce the cost of the delivery of care. Through Duke LifePoint Healthcare, we operate a growing regional network of affiliated community hospitals in a relationship that benefits all participants. As we acquire new hospitals in the region, Duke, which serves as the clinical hub of the network, has benefited by expanding its referral base throughout North Carolina and Virginia, which LifePoint then operates as managing partner of the joint venture."

The report said Duke LifePoint hospitals benefit from greater access to valuable resources and expertise plus the prestige and reputation for excellence associated with the Duke brand.

"Patients and payers benefit from a partnership that fortifies the quality of care and its delivery in the most appropriate and cost-effective settings," the report said.

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