KentuckyOne Health lost nearly $100 million in last half of 2013 - WDRB 41 Louisville News

KentuckyOne Health lost nearly $100 million in last half of 2013

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LOUISVILLE, Ky. (WDRB) -- KentuckyOne Health lost nearly $100 million on its statewide operations during the last six months of 2013, according to a financial report released late last month by Denver-based Catholic Health Initiatives.

The March 25 report shows KentuckyOne was by far the worst performing of 11 major divisions within CHI – a nonprofit healthcare company with operations in 18 states – during the last half of 2013.

CHI's Kentucky region, or KentuckyOne Health, lost $24 million before interest, depreciation and amortization – or $98.6 million with those standard expenses factored in, according to the report.

The figures shed light on KentuckyOne's financial condition just before it laid off about 500 employees in February and eliminated another 200 unfilled positions. KentuckyOne CEO Ruth Brinkley has said the organization needs to improve its performance by $218 million by June 30, 2015.

KentuckyOne is "making progress" toward that goal, spokesman David McArthur said Tuesday.

"Across the nation health care systems are facing challenging times, and KentuckyOne Health is not immune," McArthur said in an emailed statement. "…(We) are focused on finding additional efficiencies through the consolidation of services; launching strategic partnerships, such as our recent announcement with Walgreens; recruiting physicians; and increasing our outpatient care and primary care access, such as our new Anywhere Care program."

In the report, CHI cited a handful of factors plaguing its Kentucky region, including less use of healthcare services and IT problems.

Formed in 2012, KentuckyOne Health includes the Louisville-based Jewish Hospital & St. Mary's HealthCare; the Lexington-based Saint Joseph Health System; and essentially all of University Hospital and the James Graham Brown Cancer Center through a long-term partnership with the University of Louisville.

KentuckyOne is CHI's second-biggest regional unit, making up 16 percent of its operating revenue during the last half of 2013. KentuckyOne generated $1.9 billion in revenue during CHI's most recent fiscal year, which ended June 30.

The $98.6 million KentuckyOne lost during the six months ended Dec. 31, 2013 already exceeds the $94 million it lost for the entire fiscal year ended in June, according to CHI's reports covering both periods. However, comparisons are complicated by the fact that the University of Louisville facilities didn't become part of KentuckyOne until March 2013.

In the most recent report, CHI said its Kentucky region "continues to be challenged" by four issues:

  • "Utilization" is down, meaning hospitals and other facilities are seeing fewer patients or performing fewer procedures. That's an issue affecting the whole hospital industry, according to Liz Sweeney, a credit analyst at Standard & Poor's, one of the firms that rates CHI's ability to repay its debts.
  • There are "physician retention issues." In other words, "They are saying that some physicians are leaving" KentuckyOne, Sweeney said.

KentuckyOne's McArthur said retaining doctors is "a statewide issue…particularly in rural areas." In response, he said KentuckyOne has "implemented a statewide recruitment/retention strategy" that includes establishing a physician leadership council. He added that KentuckyOne's academic affiliation with the U of L medical school "is another opportunity for physicians to develop a strong practice within the KentuckyOne."

  •  "Shifts in payer mix," meaning more KentuckyOne patients are paying out of pocket or are covered by Medicaid instead of by commercial insurance. "The reason that matters is because hospitals get paid better from (insurers like) Aetna than they do from Medicaid or people with no insurance," Sweeney said.
  • "Ongoing challenges with systems conversion," meaning efforts to merge disparate information technology and electronic medical records systems. Sweeney said it's often difficult for big systems like CHI to convert a bunch of formerly separate clinics and hospitals to the same IT platform. "During the conversion process, there can be a lot of disruption in productivity" as well as extra expenses for consultants, she said.

The report shows that the addition of University Hospital and the James Graham Brown Cancer Center have helped KentuckyOne's results.

The U of L facilities generated $17.3 million in net operating income for KentuckyOne based on $257.1 million in revenues during the last six months of 2013, according to the report.

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