Healthcare Business News
Iasis President and CEO Carl Whitmer

Iasis Healthcare moves toward integrated-delivery transformation

By Beth Kutscher
Posted: May 6, 2014 - 6:30 pm ET

Franklin, Tenn.-based Iasis Healthcare, which is seeking to become an integrated-delivery company, saw growth in its hospital and health plan operations even as sequestration and the costs of selling its Florida hospitals cut into earnings.

For its fiscal second quarter ended March 31, the private equity-backed chain reported a net loss of $6 million, compared with net earnings of $1.2 million during the prior-year period.

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However, net revenue increased to $648.1 million, a 7.7% increase over the $601.8 million it booked in the second quarter of fiscal 2013.

John Doyle, Iasis chief financial officer, said sequestration was a $3 million drag on earnings, and the company also booked $4.9 million in costs associated with selling its three Florida hospitals to HCA in October. Other factors affecting its financials included a decline in Health Information Technology for Economic and Clinical Health Act income and a one-time special bonus paid to its leadership team.

Nevertheless, the company is pleased with the way healthcare reform has begun, he said.

“The biggest impact was in Arizona; that's where we saw a nice shift,” Doyle told Modern Healthcare. “The indicators are pretty clear to us that the enrollment trends are positive and we're going to have a nice benefit from it.”

Admissions decreased 3.6%, or 0.2% when adjusted for outpatient activity, with a moderate impact from a milder flu season and inclement weather, particularly in Texas. The company did see a 2.6% increase in revenue per adjusted admission, as it benefited from an improved payer mix and fewer self-pay patients.

About 700 Iasis patients gained Medicaid coverage while 100 enrolled in an exchange product.

Self-pay patients represented 6.8% of total admissions in the second quarter, compared with 7.8% during the prior-year period and 8.3% in the system's first fiscal quarter.

In Iasis' two largest Medicaid expansion states, Arizona and Nevada, Medicaid admissions increased 10%, with a 40.8% decline in the system's uninsured volumes in those states. In comparison, Medicaid admissions increased just 0.9% in non-expansion states, and uninsured volumes declined 9.7%.

As a result, Iasis' uncompensated care margin decreased to 21.5% from 23.8% in the second quarter of fiscal 2013, and 24.6% in the first fiscal quarter.

Membership in the system's Health Choice managed-care organization increased to more than 207,000, an 11.3% increase year-over-year. The health plan operates in Arizona and Utah with near-term plans to expand into a third state where Iasis does not yet have a presence, said Iasis President and CEO Carl Whitmer on an earnings call.

Health Choice is helping Iasis transform into an integrated healthcare-delivery company, Whitmer said. While most of its growth came from Medicare and Medicaid managed-care contracts, the plan added 500 lives through the Arizona insurance exchange. Iasis also is building collaborations between insurers and physicians to experiment with new payment and delivery models.

Since exiting Florida, Iasis is looking for hospital acquisitions in new and existing markets. “We're at the table at a good number of these and the discussions are exciting,” Whitmer said.

While Iasis will weigh a number of demographic factors when deciding to enter a new market, Medicaid expansion could make a particular state more attractive, Doyle said.

Iasis also said it broke ground on a new 40-bed facility, Mountain Point Medical Center in Lehi, Utah, which it plans to open in summer 2015.

Follow Beth Kutscher on Twitter: @MHbkutscher

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