After a challenging 2020, ProMedica's finance chief said he expects the system will strengthen its finances in the back half of this year.
The Toledo, Ohio-based health system posted $51.2 million in operating income on $6.9 billion in revenue in 2020, a slim, 0.7% margin. That's an improvement from the prior-year period, when its margin was 0%. Despite a strong performance on the health plan side, the COVID-19 pandemic contributed to a loss on the provider side.
ProMedica Chief Financial Officer Steve Cavanaugh said on an investor call Monday that the health system will get a net cash boost likely this year through a transaction that will add nine Genesis HealthCare skilled-nursing facilities under the PowerBack brand to its portfolio. He said the facilities are modern and have occupancy and payer mix that's above the average across the health system's current portfolio.
Cavanaugh said the facilities being acquired are located mostly in the Philadelphia, Denver and Washington, D.C., areas.
"We would quite frankly say that those facilities are our most respected competitor right now in those markets and we're very pleased to add those facilities and those staff to the ProMedica family," he said.
ProMedica is also divesting 25 "nonstrategic, older" skilled-nursing facilities from its senior-care division, Cavanaugh said. The occupancy and payer mixes of those facilities are below the average across ProMedica's portfolio, he said.
Both transactions are taking place with ProMedica's joint venture partner, Welltower. Since ProMedica closed on its acquisition of HCR ManorCare in 2018, the division has returned almost a quarter billion dollars in cash to the health system, Cavanaugh said. The investment was initially viewed as a risky one, and contributed to credit downgrades.
In 2020, ProMedica's senior-care division posted a 1.4% operating margin, having generated $41 million in income on almost $3 billion in revenue. That's down from a 2.4% margin in 2019.
ProMedica's provider division lost almost $64 million on operations in 2020, a 2.9% loss margin. Cavanaugh said that's primarily because of procedure shutdowns related to the pandemic. The division's $123.4 million in federal stimulus grants wasn't enough to offset the lost volumes and higher costs related to the crisis, he said.
"We did the best we could with a very, very difficult hand in our provider business," he said.
On the insurance side, Paramount generated $83.6 million in operating income in 2020, a 4.2% margin. That's a positive swing from the 3.9% loss margin the health plan posted in 2019.
Cavanaugh said the insurance plan "served as a great hedge while we dealt with problems in other areas."