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.
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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