The analysis shows that some hospitals simply can't be saved, no matter how savvy their operator. Jeremy Johnson, a shareholder with the law firm Polsinelli who specializes in bankruptcy, has seen that unfortunate scenario run its course for a number of health systems, including one in West Virginia that filed for bankruptcy in January.
"There's no potential solution for that situation," he said. "You can't change the demographics. You can't change the payer system, the rate of uninsured."
Curae Health, which declared bankruptcy in 2018 after buying three CHS hospitals in Mississippi the previous year, had a vision of truly solving the rural hospital problem, said Johnson, who served as counsel for the company. Curae planned to centralize purchasing at the hospitals and run them more efficiently, he said.
"That was their plan and they just could not do it," Johnson said. "They couldn't get it done."
A media line for Curae has been disconnected.
The Medical University of South Carolina bought four struggling CHS hospitals in that state in March 2019. One of them, Springs Memorial Hospital in Lancaster, reported an eye-popping 141% operating loss margin as of February 2019, the most recent data publicly available. Carolinas Hospital System-Marion in Mullins reported a 107% operating loss margin as of February. The hospital in Florence reported a 67% loss margin at that time, and another in Chester reported a 64% loss margin.
Despite that, MUSC Health says the markets those hospitals are in exceeded their budgeted targets in fiscal 2019, spokeswoman Heather Woolwine wrote in an email. She said the hospitals have migrated to key MUSC platforms, such as its electronic health record system.
"We are seeing increased utilization of services in those markets since the purchase, which reinforces our position that the community well understands that accessing high quality and coordinated care in their local communities is what's best for patients and their families," Woolwine said.
PinnacleHealth bought four Pennsylvania hospitals from CHS in July 2017. That same year, the health system became part of UPMC. In early 2019, UPMC closed one of those former CHS hospitals and routed services to its nearby hospital in Lititz, another CHS purchase. Since 2018, the latest year for which data is available, each of the three remaining hospitals have reported financial losses, a departure from when they were owned by CHS.
The Lititz hospital reported a 9.6% loss margin in the fiscal year ended June 2018, compared with margins in excess of 10% in each of the previous four years, Modern Healthcare Metrics data show.
UPMC Pinnacle CEO Philip Guarneschelli said in a statement that admissions, emergency department and outpatient visits are all increasing at that hospital, along with patient satisfaction scores.
The hospital UPMC Pinnacle bought from CHS in Carlisle also took a turn in 2018, reporting a 6.2% loss margin after reporting a 5.5% positive margin in 2017 and a 6.1% margin in 2016, Metrics data show. Another CHS purchase, Memorial Hospital in York, now known as UPMC Memorial, reported a 7.3% negative margin in the year ended June 2018, after a 0.5% positive margin in 2017 and a 5% margin in 2016.
Since the acquisitions, UPMC Pinnacle has invested in each hospitals' inpatient and outpatient facilities and services, including adding UPMC Hillman Cancer Centers in each of the three regions, Guarneschelli said. Each of the hospitals and their outpatient locations have been integrated into the health system's EHR system, Epic.
In its 10-county, central Pennsylvania coverage area, UPMC Pinnacle strives to achieve economies of scale, drive marketplace innovation, attract talent and keep costs low, Guarneschelli said.
"With the addition of these hospitals, UPMC Pinnacle spread cost over a larger base of operations and improved our access to capital—allowing us to fund further innovation and make critical investments in our system and communities," he said.
Through the end of 2019, CHS completed divestitures accounting for roughly $2.3 billion in net revenue, generating about $1 billion in gross proceeds, Smith said on Thursday's call.
CHS expects to complete its divestiture plan by the middle of this year, generating roughly $300 million in additional gross proceeds, Smith said.
"As divestiture activity comes to a close, our full attention now can remain on the markets that will remain with our organization long term," he said.