Fairview blames hep C drugs for drop in earnings

Fairview Health Services is blaming its second-quarter drop in operating income on a drop in demand for pricey hepatitis C drugs.

The seven-hospital system's surplus also was reduced by the continuing shift from inpatient to outpatient settings, the Minneapolis-based system said in its recent financial filing.

Fairview, which is exploring a merger with the University of Minnesota Physicians, registered a $36.6 million operating income in the second quarter on revenue of $956.7 million, down 28.8% compared with a $51.4 million surplus on $895.7 million in revenue a year ago. It posted an operating margin of 3.8% in the second quarter, compared with 5.7% a year ago.

For the first six months of 2015, Fairview's operating margin was 3.4%, down from 4% in the same period last year. Total operating income year over year was $64.2 million, compared with $68.9 million in 2014. Total patient days dropped slightly, but occupancy rates rose to 66.8% from 65.7%, as the system continues to shrink its inpatient capacity.

In announcing its merger plan, Fairview officials said the move would provide additional resources and enable it to deliver better care. The Fairview and the University of Minnesota boards said in a joint news release this month that they hope to unveil the final terms of the merger next spring. —Michael Sandler

As Illinois nears its fourth month without a budget, healthcare providers and health plans are scrambling to maintain services despite late and erratic Medicaid payments.

Republican Gov. Bruce Rauner continues his high-stakes poker game with Democratic legislative leaders. He's pushing for tighter worker compensation rules, limiting collective bargaining by public employees, liability lawsuit curbs, term limits for lawmakers and a property tax freeze—demands the Democrats reject.

A federal court ruled in July that the state must continue making Medicaid payments. This has kept many providers from closing, but there is uncertainty about how long the state can continue making payments.

Jeff Joy, CEO of Illinicare Health, said providers can't prop up the Medicaid program indefinitely. The state is routinely at least two months behind in payments, and some physicians have stopped seeing Medicaid patients.

Maryjane Wurth, CEO of the Illinois Hospital Association, said the state's safety net and rural hospitals in particular are struggling with cash flow. Hospitals are looking at layoffs, service cuts and possibly closures. Even for less-affected hospitals, future projects are on hold.

Joel Johnson, CEO of the Human Resources Development Institute, which provides behavioral health services, said his organization has had to close some residential programming and furlough about 60 staffers. Psychiatric care will be eliminated on Nov. 1. “It's all coming to a head right now, at a risk to some of our most vulnerable people,” he said. —Shannon Muchmore