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King's Daughters sees losses rise as turnaround efforts continue


By Beth Kutscher
Posted: May 16, 2014 - 6:30 pm ET
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King's Daughters Medical Center, in the midst of a performance improvement plan to turn around its results, reported a larger year-over-year operating loss in the first half of its fiscal year.

The 612-bed hospital is the largest in Kentucky and is based in Ashland, a city in the northeastern part of the state near the West Virginia border. It has struggled with volume declines, particularly for cardiac procedures.

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In addition to lower patient utilization being felt across the state, King’s Daughters has faced negative publicity resulting from a U.S. Department of Justice investigation into the high volume of cardiac device implantations performed there on Medicare patients between 2006 and 2011.

In an earnings report for the six-month period ending March 31, the medical center said admissions declined 13.3% year over year and patient days fell 15.2%.

However, King’s Daughters, which is in a Medicaid expansion state, did report a 2.1% decline in self-pay patients with a 2% increase in Medicaid patients. Bad debt and charity write-offs were the equivalent of 4.5% of revenue compared with 7% in the prior-year period.

Yet it wasn’t enough to offset a 7.4% year-over-year decline in net revenue. The hospital reported a net loss of $13.9 million on $235.5 million in revenue for the period compared with a net gain of $9.9 million on $254.4 million in the first half of fiscal 2013.

Its expenses also grew 1.4%, mainly due to a 17.2% increase in purchased services. Those were consulting fees for revenue-cycle management improvement initiatives and legal fees associated with the DOJ investigation.

However, King’s Daughters trimmed 7.6% from its operating expenses as it put in place a cost-reduction plan. Its financial improvement strategy focuses on a number of areas including revenue-cycle management, staffing productivity and its supply chain.

The hospital also noted that most of its $25.4 million operating loss—or $17.7 million—occurred in its first fiscal quarter, while the second quarter showed some improvement.

About $3.2 million of that loss was attributable to one-time expenses related to severance pay or the DoJ investigation, the hospital said.

King’s Daughters has set aside $48.9 million in reserves in anticipation of a potential settlement with the DOJ. In an addendum to its 2013 financial report, the hospital clarified that it is still in negotiations with the DOJ and a final settlement has not yet been reached, correcting a footnote in the report.

Follow Beth Kutscher on Twitter: @MHbkutscher


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