Anthony Jones, a hospital turnaround consultant hired by Catholic Health Initiatives as its interim operating chief, got a glimpse of the work ahead in a first-quarter operating loss of $217.8 million.
For the quarter ended Sept. 30, the first of CHI's fiscal 2017, the 103-hospital system posted operating declines before interest depreciation and amortization in seven of its 10 multi-hospital markets compared with the year-earlier period, according to the system's financial statement.
Problems were particularly acute in Kentucky, Nebraska and Texas.
Jones, 58, was hired Dec. 5, on an interim basis to replace longtime Chief Operating Officer Michael Rowan, who resigned effective Dec. 31 to pursue other opportunities. Jones is CEO of Alliance Partners, a Los Angeles-based healthcare management and consulting firm specializing in operational and financial turnarounds.
Jones previously acted as interim CEO to oversee turnarounds at University Hospital of Brooklyn in New York City and at the Tulare (Calif.) Regional Medical Center.
Englewood, Colo.-based CHI is in the midst of merger talks with Dignity Health to determine whether they will combine, eclipsing Ascension as the nation's largest not-for-profit hospital company.
San Francisco-based Dignity Health has 39 hospitals located in California, Arizona and Nevada. CHI's 103 hospitals are spread across 17 states. The two companies expect to decide by early 2017 whether to pursue a tie-up.
The earnings of the two systems are headed in opposite directions.
Dignity's financial results swung dramatically back into the black in the three months ended Sept. 30, when it posted operating income of $30.8 million on revenue of $3.25 billion. That compared with an operating loss of $47.5 million on revenue of $3.08 billion in the year-earlier quarter.
CHI's first-quarter operating loss of $217.8 million compared with an operating gain of $7.8 million in its year-earlier quarter. Revenue in the first quarter was $4.11 billion vs. $4.03 billion in the same period a year ago.
CHI's Kentucky hospitals, known as KentuckyOne, were the biggest loser for CHI, finishing the quarter in the red on an operating EBITDA basis.
The hospitals, focused around Louisville and Lexington, posted an operating EBITDA loss of $5.4 million compared with an EBITDA operating gain of $34.5 million in the year-earlier quarter.
KentuckyOne removed three key executives this past summer and recently announced that it would no longer manage the University of Louisville Hospital and its affiliated cancer center after June 30.
CHI's Houston-heavy Texas operations also had a dismal quarter. Texas stayed in the black during the quarter. But its operating EBITDA fell to $6.8 million from $36.8 million in the year-earlier period.
Quarterly operating EBITDA for Nebraska hospitals tumbled to $19.1 million compared with $39.1 million in the year-earlier quarter.
Systemwide, CHI experienced increases in patient volumes, but unfavorable shifts in payer mix “combined with increased compensation and supplies costs,” the company said in its earnings release.
On the positive side, operating EBITDA in the quarter climbed in Ohio, Tennessee and CHI's Pacific Northwest operations.