Daughter of Charity Health System, the Los Altos Hills, Calif.-based group still searching for a buyer after its sale to Prime Healthcare Services unraveled this year, continues to face a tenuous financial picture.
The six-hospital Northern California system warned bondholders in November that it may not be able to continue operating without running out of funds. Its latest third-quarter balance sheet, for the period ended March 31, shows that Daughters has 20 days of cash on hand, a decrease from the 32 days it had at the same point last year.
Its largest challenges—which contributed to a $55.3 million operating loss in the quarter—include an adverse payer mix, reimbursement rate increases that were below historical levels and losses in its physician network, the system said in its financial filing.
That loss came despite higher volume and the return of the California provider fee program, which provides additional funding to hospitals that treat a significant number of Medicaid patients but had been on hold in 2014 while the state waited for CMS to approve its extension.
Daughters watched its $843 million sale to Prime fall apart in March after the Ontario, Calif.-based chain refused to accept the lengthy list of conditions imposed on the deal by Attorney General Kamala Harris. Local politicians and union leaders had fought the takeover, citing a long list of allegations against Prime, including billing, safety and labor violations—all of which Prime disputes.
On Wednesday, in a news release announcing a six-month contract extension with two unions, Daughters reiterated that multiple, undisclosed buyers remain interested in purchasing the system.
In a March interview, CEO Robert Issai described the interested parties as health systems and a major medical group that has partnered with insurers. But it's unclear who remains in the running. The initial field of suitors from which Prime was selected included for-profit hospital chains and private investor groups.
For the nine-month period, Daughters reported a $55.3 million operating loss on $1.1 billion in revenue, compared with a $16.7 million operating surplus on $1.1 billion in revenue during the same period last year.
Discharges at the system increased 0.9% year over year for the nine-month period, or 2.8% when adjusted for outpatient activity. Emergency room visits were up 9.4% and outpatient surgeries increased 1.9%. However, Daughters saw an 8.1% drop in its inpatient surgeries.