Healthcare Business News

Increased volumes, ACA help lift ProMedica's finances

By Bob Herman
Posted: August 12, 2014 - 3:30 pm ET

Income and revenue at ProMedica improved in the first half of 2014 as the number of unpaid patient bills fell. The Ohio health system cited higher volumes, the Patient Protection and Affordable Care Act and an early retirement buyout as contributors toward those financial gains.

“We are pleased with our first two quarters of 2014,” Alan Sattler, ProMedica's chief financial officer, told Modern Healthcare. “I don't know if we can link it all to the Affordable Care Act, but certainly, we see changes in our payer mix … with our Medicaid increasing and some of our charity amounts down.”

ProMedica, based in Toledo, said in its second-quarter financial disclosure (PDF) that two of the healthcare reform law's main tenets—expansion of Medicaid for the poor and increased private health coverage through insurance marketplaces—helped the system to some degree. Republican Ohio Gov. John Kasich bucked the party line last fall and agreed to expand Medicaid to more than 275,000 low-income Ohioans.

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ProMedica realized $35.5 million in operating surplus in the first half of this year on $732.4 million in revenue. That performance represented a 75% increase from last year's operating surplus and a 3.4% boost from last year's revenue. The system's operating margin consequently improved to 4.9% in the first half of this year from 2.9% in the first half of last year.

Further, ProMedica said charity care decreased from 2.3% of gross revenue for the first half of last year to 1.7% for the same period this year. Bad debt fell from 1.7% to 1.2% of its gross revenue. Self-pay patients represented 2.3% of ProMedica's revenue, down from 3.5% in the same period last year, and Medicaid patients accounted for 17.1% of revenue this year compared with 15.8% in 2013.

“Key drivers for the decline in both charity care and bad debt were more patient access to insurance coverage through the Patient Protection and Affordable Care Act,” the system wrote in the financial documents.

ProMedica's health insurance company, Paramount, also recorded ACA-related developments. The organization doubled its Medicaid lives in the past year, as it expanded its service region from northwest Ohio to the entire state. Paramount expects to offer small group insurance plans on the Small Business Health Options Program, or SHOP, marketplaces, according to the system.

Utilization was up nearly across the board at ProMedica, a trend not seen at many other not-for-profit organizations and something that Sattler said contributed greatly to the system's financial stability. Acute discharges, outpatient surgeries and emergency room visits in the first half of 2014 increased 4.2%, 9.7% and 8%, respectively, compared with the same period in 2013.

Sattler also said an early retirement offering helped to keep down operating expenses. More than 500 employees accepted the deal.

“The whole goal there was to reward our long-term employees but also be very careful about replacement positions,” Sattler said. “It's given us the opportunity to restructure and remove some layers of management, and streamline the organization.”

ProMedica has garnered national attention lately due to a legal battle with the Federal Trade Commission. The FTC has ordered ProMedica to sell St. Luke's Hospital in Maumee, Ohio, over antitrust concerns. However, ProMedica has appealed the decision. Most recently, in June, it asked the full 6th U.S. Circuit Court of Appeals to rehear the case, but the court rejected the motion late last month.

In the disclosure, ProMedica said it “intends to appeal this decision and is fully committed to exhausting all legal options.” Sattler confirmed that the next step will be a petition to the U.S. Supreme Court.

The system also disclosed other second-quarter events. In April, the CMS threatened to revoke the Medicare and Medicaid eligibility of Flower Hospital, a 221-bed ProMedica affiliate in Sylvania, Ohio, due to an undisclosed patient-safety issue, but the hospital issued a correction plan and averted termination from the insurance programs in May.

“It's all been resolved,” Sattler said. “CMS has come on-site and actually verified that everything they were concerned about was implemented … safety continues to be a big area we focus on.”

ProMedica is also conducting due diligence on a new acquisition target: Mercy Memorial Hospital System in Monroe, Mich., located about 25 miles from Toledo. The two parties signed a letter of intent in early July.

Follow Bob Herman on Twitter: @MHbherman

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