An experimental Medicare HMO and money-losing contracts with employed doctors continue to squeeze the bottom line at Crozer-Keystone Health System.
But the three-hospital system, based in Springfield, Pa., has cut losses recently compared with the year-ago period and seems on track to stabilize declining operations, said Moody's Investors Service, the New York bond rating agency.
For the first six months of fiscal 1999 ended Dec. 31, Crozer-Keystone posted a consolidated operating loss of $5 million on total revenues of $243.7 million, compared with an operating loss of $10.3 million on revenues of $245.3 in the year-ago period, Moody's said. The system posted a net loss of $1.4 million for the first half of fiscal 1999 because of revenues from nonoperating sources.
The strain of operating losses on Crozer-Keystone's cash flow has sapped the system's flexibility, however. Moody's downgraded $155 million in debt for 645-bed Crozer-Chester Medical Center, Upland, Pa., to Baa2 from Baa1.
Nevertheless, Moody's said the credit outlook for Crozer-Keystone is stable at the lower rating. That finding is "noteworthy for a Philadelphia-based healthcare provider, since Moody's maintains negative rating outlooks on most local providers," the report said.
Crozer-Keystone President and Chief Executive Officer John McMeekin said, "We have worked hard to maintain our margins in the face of continuing pressure from managed-care penetration and the effects of the Balanced Budget Act . . . (by) eliminating redundancy and excess capacity through consolidation."
Moody's said the system had begun talks with HCFA to raise rates for the Medicare HMO, which was started in 1997 and has about 4,000 enrollees.
In addition, Crozer-Keystone has taken "aggressive steps" to cut losses on contracts with employed physicians by terminating some agreements and restructuring others, Moody's said.
For the six months ended Dec. 31, 1998, Crozer-Keystone posted an operating loss of $3.5 million on its physician network, compared with a $5.4 million loss in the year-ago period.