Catholic Health Initiatives wrestles with Texas expansion

Catholic Health Initiatives, the national system that aggressively expanded its reach in recent years, ended its second quarter with gains in Nebraska and Kentucky but weaker results in one of its newest markets, Texas.

The system, based in Englewood, Colo., said operations improved in Nebraska after CHI and Blue Cross Blue Shield of Nebraska settled a dispute last summer.

The state Blues plan ejected the system's hospitals from its network after CHI sought a Nebraska insurance license. The insurer cited high prices for cancelling CHI's contract. Negotiations led to an agreement last July that returned the system's hospitals to the Nebraska Blues network.

In Kentucky, Medicaid expansion bolstered CHI's operations. Nebraska and Kentucky accounted for roughly 25% of the system's revenue in the second quarter.

Poor performance in Texas, however, dragged down results. The system entered Texas in 2013 and rapidly expanded. The state accounted for about 12% of CHI's revenue for the three months that ended Dec. 31. The system is looking to turnaround its Texas operations and will also seek to bolster employee productivity and reduce supply costs.

Overall, labor and supplies increased 6.7% and 8.8%, respectively, across the system. Operating expenses increased 8.9% to $4.14 billion, thanks in part to rising prices and use of specialty drugs and growth in medical claims paid out under CHI's fledgling insurance arm, Prominence Health.

Prominence Health's premium revenue increased during the second quarter, climbing 31% from the same quarter the prior year.

Revenue from treating patients increased 7.3% for the quarter. But the system's total revenue dropped by 4.5% to $4.02 billion from the same quarter in 2014, when CHI's revenue saw a $406 million boost from recent deals.

CHI ended the quarter with an operating loss of $125.9 million compared with an operating gain of $400 million the prior year.

The system ended the three months with a net loss of $29.7 million after investments rebounded to deliver $111.3 million in investment gains for the quarter.

Correction, March 23, 2016:

An earlier version of this story incorrectly referred to CHI's insurance unit Prominence Health as Presence Health.

Melanie Evans

Melanie Evans writes about healthcare finance, hospital management and governance issues. She has been part of the Modern Healthcare staff since 2004. Earlier in her career she covered healthcare and not-for-profits as a reporter at the Duluth (Minn.) News Tribune. She received a bachelor's degree in international relations from Boston University and a bachelor's in journalism from the University of Minnesota.

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