Thirteen-hospital Allina Health System is launching a health plan with Aetna and preparing to sell $231.2 million in bonds as it forges past 2016.
Nurses went on two separate strikes at five Minneapolis-area hospitals during nine months of protracted negotiations that finally yielded a new three-year contract in October.
But the work stoppages, which totaled more than 45 days, cost Allina $135.6 million for the year, the system reported in a financial disclosure last week.
That heavy cost turned a $119.2 million operating gain into an operating loss of $16.3 million in 2016. That compared with an operating gain of $149 million in 2015 for Allina. Revenue in 2016 jumped to $3.95 billion compared with $3.8 billion in the prior year.
Bond rating agencies, Fitch, Moody's and S&P, are giving Allina's upcoming bond issue high ratings based on the system's post-strike results. Fitch is rating the offering AA- and Moody's Aa3.
Fitch notes that Allina plans to use $150 million of the net proceeds from the offering to improve facilities. The remainder will refund previous debt.
Allina is the market volume leader in the Twin Cities with 31% of inpatient market shares, Fitch notes. Fairview Health Services is a distant second at 20% and HealthPartners is third at 16%.
Excluding the nurses strikes, Allina posted a solid adjusted operating margin of 3% and a margin of 8% on earnings before interest taxes depreciation and amortization.
By next year, Allina will enter into a joint venture with Aetna to sell health insurance products in Minnesota, the companies announced in January.
Though the details of the products and how much capital each side will contribute to the new for-profit company haven't been revealed, Allina CEO Penny Wheeler said that both companies see opportunities in Medicare Advantage, a managed care program for seniors, and other lines that can benefit from Allina's provider network and population management expertise.
Banner Health, another not-for-profit health system based in Phoenix, also recently announced an insurance joint venture with Aetna.