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Quorum Health Corporation Announces Second Quarter 2019 Results

BRENTWOOD, Tenn.--(BUSINESS WIRE)--

Second quarter net loss attributable to Quorum Health Corporation was ($16.9) million, or ($0.56) per share

Second quarter Adjusted EBITDA was $33.4 million and Same-facility Adjusted EBITDA was $36.9 million

Announces agreement with MEDHOST Inc. to deploy its Electronic Health Record platform

Quorum Health Corporation (QHC) (the “Company”) today announced financial and operating results for the second quarter ended June 30, 2019.

 

QUORUM HEALTH CORPORATION
Unaudited Financial Highlights
(In Millions)

 

 

Three Months Ended June 30,

 

2019

 

2018

Net operating revenues

$442.2

 

$472.6

 

Net loss attributable to Quorum Health Corporation

($16.9 )

 

($26.6

)

Same-facility net operating revenues

$442.4

 

$458.5

 

Cash flows from operating activities

($10.4 )

 

$17.2

 

Adjusted EBITDA(1)

$33.4

 

$36.3

 

Same-facility Adjusted EBITDA(1 & 2)

$36.9

 

$40.2

 

 

 

 

 

(1) A table providing supplemental information on Adjusted EBITDA, Same-facility Adjusted EBITDA and reconciling net loss to Adjusted EBITDA and Same-facility Adjusted EBITDA is included in this release, see footnote (a).
(2) Same-facility Adjusted EBITDA was previously reported by the Company as Adjusted EBITDA, Adjusted for Divestitures. There has been no change in how the financial measure is being calculated.

Financial results for the second quarter ended June 30, 2019 reflect the following:

  • Compared to the second quarter of 2018, same-facility net patient revenues decreased 2.6%, while same-facility net patient revenues per adjusted admission increased 0.9%. The decrease in same-facility net patient revenues compared to the second quarter of 2018 reflects a 3.4% decline in same-facility adjusted admissions and a 2.2% decline in same-facility surgeries. The decline in volumes compared to the second quarter of 2018 represents approximately $14.9 million of same-facility net patient revenues.
  • Same-facility net operating revenues for the second quarter of 2019 reflect a $5.6 million decrease related to Watsonville Community Hospital and MetroSouth Medical Center (the “Pending Divestitures”). The Pending Divestitures incurred negative Adjusted EBITDA of $2.4 million during the second quarter of 2019. The Company previously announced that it had entered into a definitive agreement to sell Watsonville Community Hospital and discontinue operations at MetroSouth Medical Center by the end of 2019. The Company will continue to reflect the results of the Pending Divestitures in its same-facility results until the facilities have been sold or closed (see “Divestiture Update” below).
  • Second quarter 2019 Adjusted EBITDA was 7.6% of net operating revenues and Same-facility Adjusted EBITDA was 8.3% of same-facility net operating revenues. Excluding the impact of the Pending Divestitures, Same-facility Adjusted EBITDA as a percent of same-facility net operating revenues would have been 10.3% in the second quarter of 2019 compared to 10.0% in the second quarter of 2018.
  • Same-facility operating expenses in the second quarter of 2019 reflect a $28.5 million reduction in professional and general liability reserves due to a change in actuarial estimates, including a $23.5 million reduction that relates to prior years and is excluded from Same-facility Adjusted EBITDA. Factors contributing to the change in estimate include the use of valuation techniques that place more emphasis on the Company’s claims subsequent to the Spin-off compared to historical trends, as well as more reliance on industry trend factors. The reduction in the frequency and severity of the Company's claims is the result of internal initiatives in the areas of patient safety, risk management, and claims management, as well as external factors such as tort reform in certain key states.
  • Same-facility surgeries during the second quarter of 2019 improved 8.9% compared to the first quarter of 2019, as the Company focused on improving volumes at two facilities impacted by independent physician turnover and re-syndicating two outpatient surgery centers in Illinois. Excluding these four facilities and the Pending Divestitures, same-facility surgeries increased 4.9% during the second quarter of 2019 compared to the second quarter of 2018 as a result of the Company’s efforts to increase volumes in higher acuity service lines.

TSA Transition and R1 RCM Partnership Update

  • The Company announced today that it had signed an agreement with MEDHOST Inc. (“MEDHOST”) to deploy their Electronic Health Record platform in connection with the Company’s planned transition from its Computer and Data Processing Transition Services Agreement (or “IT TSA”) with Community Health Systems, Inc. (“CHS”). The Company currently utilizes MEDHOST’s software through its IT TSA with CHS. The Company will incur additional costs to establish the remainder of its information technology systems. The Company expects the transition to be completed by the end of the first quarter of 2021.
  • As previously announced, the Company has partnered with R1 RCM to provide end-to-end revenue cycle management services. The Company is on-track with the implementation of R1 RCM’s services and believes that the agreement with R1 RCM will result in approximately $5 million in cost savings and $5 million of improved net patient revenues during the second half of 2019. Beyond 2019, the Company expects the annual impact of the R1 RCM partnership to grow to approximately $45 million by 2021, which is revised from its previous estimate of $50 million to account for the Pending Divestitures.

Divestiture Update

  • During the second quarter of 2019, the Company announced that it had entered into a definitive agreement to divest 106-bed Watsonville Community Hospital in Watsonville, California. Cash proceeds from the transaction are expected to be approximately $35 million to $40 million, subject to final net working capital balances.
  • On July 18, 2019 the Company received notice from the Pajaro Valley Community Health Trust (“Trust”) that it had exercised its Right of First Refusal to purchase the stock interests of Watsonville Community Hospital. If the terms of the Right of First Refusal are not met, the definitive agreement entered into on May 31, 2019 will remain in effect. The Company currently anticipates completing the sale of Watsonville by the end of 2019.
  • The Company previously announced that it would either sell or discontinue operations at MetroSouth Medical Center in Blue Island, Illinois by the end of 2019. The Company later announced that operations will be discontinued by the end of the third quarter of 2019. The Company expects to complete its assessment of the closure of MetroSouth by the end of the third quarter, including any potential impacts on the Company's results of operations, financial position and cash flows.

Financial Outlook

The Company is revising its 2019 Same-facility net operating revenues guidance as a result of the Pending Divestitures. The Company is reiterating its previously established guidance for Same-facility Adjusted EBITDA.

 

 

(In Millions)

2018 Actual

 

2019 Guidance Range

Same-facility net operating revenues

$1,804.4

 

$1,550 - $1,600

Same-facility Adjusted EBITDA

$150.7

 

$160 - $180

 

These projections are based on the Company’s historical operating performance, current economic, demographic and regulatory trends and other assumptions that the Company believes are reasonable at this time. See “Forward-Looking Statements” below for a list of factors that could affect the future financial and operating results of the Company or the healthcare industry generally.

A reconciliation of the Company’s projected 2019 Same-facility Adjusted EBITDA, a forward-looking non-GAAP financial measure, to net income (loss), the most directly comparable U.S. GAAP financial measure, is omitted from this press release because the Company is unable to provide such reconciliation without unreasonable effort. This inability results from the inherent difficulty in forecasting generally and in quantifying certain projected amounts that are necessary for such reconciliation. In particular, sufficient information is not available to calculate certain items required for such reconciliation without unreasonable effort, including interest expense, provision for (benefit from) income taxes and other adjustments that would be necessary to prepare a forward-looking statement of net income (loss) in accordance with U.S. GAAP. For the same reasons, the Company is unable to address the probable significance of the unavailable information.

About Quorum Health Corporation

The principal business of Quorum Health Corporation is to provide hospital and outpatient healthcare services in its markets across the United States. As of June 30, 2019, the Company owned or leased 26 hospitals in rural and mid-sized markets located across 14 states and licensed for 2,458 beds. Through Quorum Health Resources LLC, a wholly-owned subsidiary, the Company provides hospital management advisory and healthcare consulting services to non-affiliated hospitals across the country. Over 95% of the Company’s net operating revenues are attributable to its hospital operations business.

The Company’s headquarters are located in Brentwood, Tennessee, a suburb south of Nashville. Shares in Quorum Health Corporation are traded on the NYSE under the symbol “QHC.” More information about the Company can be found on its website at www.quorumhealth.com.

Quorum Health Corporation will hold a conference call on Thursday, August 8, 2019, at 11:00 a.m. Eastern time, to review its financial and operating results for the second quarter ended June 30, 2019. To participate, please dial 1-844-761-3024 approximately 10 minutes prior to the scheduled start of the call. If calling from outside of the United States, please dial 1-661-378-9914. Please reference Conference ID number 9964019 when prompted by the conference call operator. The conference call will also be webcast live from the Investor Relations portion of the Company’s website. A presentation will be made available during the call and will be found in the Investor Relations portion of the Company’s website at www.quorumhealth.com. For those who cannot listen to the live broadcast, a replay will be available shortly after the call and will continue to be available for approximately 30 days. Copies of this press release and the Company’s Current Report on Form 8-K (including this press release) will be available on the Company’s website at www.quorumhealth.com.

 
 
 

QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In Thousands, Except Earnings per Share and Shares)

 

 

 

Three Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

% of

 

 

 

 

 

 

% of

 

 

 

$ Amount

 

 

Revenues

 

 

$ Amount

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

442,170

 

 

 

100.0

%

 

$

472,632

 

 

 

100.0

%

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

 

213,411

 

 

 

48.3

%

 

 

232,631

 

 

 

49.2

%

Supplies

 

 

50,202

 

 

 

11.4

%

 

 

52,897

 

 

 

11.2

%

Other operating expenses

 

 

106,954

 

 

 

24.1

%

 

 

144,456

 

 

 

30.6

%

Depreciation and amortization

 

 

14,500

 

 

 

3.3

%

 

 

17,142

 

 

 

3.6

%

Lease costs and rent

 

 

11,627

 

 

 

2.6

%

 

 

11,358

 

 

 

2.4

%

Electronic health records incentives

 

 

583

 

 

 

0.1

%

 

 

(445

)

 

 

(0.1

)%

Legal, professional and settlement costs

 

 

604

 

 

 

0.1

%

 

 

5,417

 

 

 

1.1

%

Impairment of long-lived assets and goodwill

 

 

25,950

 

 

 

5.9

%

 

 

 

 

 

%

Loss (gain) on sale of hospitals, net

 

 

1,140

 

 

 

0.3

%

 

 

307

 

 

 

0.1

%

Loss on closure of hospitals, net

 

 

 

 

 

%

 

 

3,338

 

 

 

0.7

%

Total operating costs and expenses

 

 

424,971

 

 

 

96.1

%

 

 

467,101

 

 

 

98.8

%

Income (loss) from operations

 

 

17,199

 

 

 

3.9

%

 

 

5,531

 

 

 

1.2

%

Interest expense, net

 

 

33,582

 

 

 

7.6

%

 

 

31,926

 

 

 

6.8

%

Income (loss) before income taxes

 

 

(16,383

)

 

 

(3.7

)%

 

 

(26,395

)

 

 

(5.6

)%

Provision for (benefit from) income taxes

 

 

94

 

 

 

%

 

 

(454

)

 

 

(0.1

)%

Net income (loss) (a)

 

 

(16,477

)

 

 

(3.7

)%

 

 

(25,941

)

 

 

(5.5

)%

Less: Net income (loss) attributable to noncontrolling interests

 

 

396

 

 

 

0.1

%

 

 

665

 

 

 

0.1

%

Net income (loss) attributable to Quorum Health Corporation

 

$

(16,873

)

 

 

(3.8

)%

 

$

(26,606

)

 

 

(5.6

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share attributable to Quorum Health Corporation stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (b)

 

$

(0.56

)

 

 

 

 

 

$

(0.92

)

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

30,001,208

 

 

 

 

 

 

 

28,995,564

 

 

 

 

 

 
 
 
 

QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In Thousands, Except Earnings per Share and Shares)

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

% of

 

 

 

 

 

 

% of

 

 

 

$ Amount

 

 

Revenues

 

 

$ Amount

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

884,975

 

 

 

100.0

%

 

$

959,452

 

 

 

100.0

%

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

 

438,486

 

 

 

49.5

%

 

 

479,631

 

 

 

50.0

%

Supplies

 

 

101,587

 

 

 

11.5

%

 

 

111,783

 

 

 

11.7

%

Other operating expenses

 

 

243,743

 

 

 

27.7

%

 

 

297,194

 

 

 

31.0

%

Depreciation and amortization

 

 

29,139

 

 

 

3.3

%

 

 

35,403

 

 

 

3.7

%

Lease costs and rent

 

 

23,158

 

 

 

2.6

%

 

 

23,890

 

 

 

2.5

%

Electronic health records incentives earned

 

 

609

 

 

 

0.1

%

 

 

(586

)

 

 

(0.1

)%

Legal, professional and settlement costs

 

 

1,289

 

 

 

0.1

%

 

 

8,830

 

 

 

0.9

%

Impairment of long-lived assets and goodwill

 

 

34,810

 

 

 

3.9

%

 

 

39,760

 

 

 

4.1

%

Loss (gain) on sale of hospitals, net

 

 

1,140

 

 

 

0.1

%

 

 

8,122

 

 

 

0.8

%

Loss on closure of hospitals, net

 

 

 

 

 

%

 

 

17,084

 

 

 

1.8

%

Total operating costs and expenses

 

 

873,961

 

 

 

98.8

%

 

 

1,021,111

 

 

 

106.4

%

Income (loss) from operations

 

 

11,014

 

 

 

1.2

%

 

 

(61,659

)

 

 

(6.4

)%

Interest expense, net

 

 

65,848

 

 

 

7.4

%

 

 

62,857

 

 

 

6.6

%

Income (loss) before income taxes

 

 

(54,834

)

 

 

(6.2

)%

 

 

(124,516

)

 

 

(13.0

)%

Provision for (benefit from) income taxes

 

 

249

 

 

 

%

 

 

(88

)

 

 

%

Net income (loss) (a)

 

 

(55,083

)

 

 

(6.2

)%

 

 

(124,428

)

 

 

(13.0

)%

Less: Net income (loss) attributable to noncontrolling interests

 

 

796

 

 

 

0.1

%

 

 

1,146

 

 

 

0.1

%

Net income (loss) attributable to Quorum Health Corporation

 

$

(55,879

)

 

 

(6.3

)%

 

$

(125,574

)

 

 

(13.1

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share attributable to Quorum Health Corporation stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (b)

 

$

(1.88

)

 

 

 

 

 

$

(4.37

)

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

29,721,167

 

 

 

 

 

 

 

28,726,445

 

 

 

 

 

 
 
 
 

QUORUM HEALTH CORPORATION
UNAUDITED CONSOLIDATED SELECTED OPERATING DATA

 

 

 

Three Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

Variance

 

 

% Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of licensed beds at end of period (c)

 

 

2,458

 

 

 

2,649

 

 

 

(191

)

 

 

(7.2

)%

Admissions (d)

 

 

16,354

 

 

 

18,200

 

 

 

(1,846

)

 

 

(10.1

)%

Adjusted admissions (e)

 

 

41,700

 

 

 

45,551

 

 

 

(3,851

)

 

 

(8.5

)%

Surgeries (f)

 

 

17,909

 

 

 

19,114

 

 

 

(1,205

)

 

 

(6.3

)%

Emergency room visits (g)

 

 

128,431

 

 

 

135,389

 

 

 

(6,958

)

 

 

(5.1

)%

Medicare case mix index (h)

 

 

1.46

 

 

 

1.44

 

 

 

0.02

 

 

 

1.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-facility: (i)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of licensed beds at end of period (c)

 

 

2,458

 

 

 

2,458

 

 

 

 

 

 

%

Admissions (d)

 

 

16,286

 

 

 

17,267

 

 

 

(981

)

 

 

(5.7

)%

Adjusted admissions (e)

 

 

41,477

 

 

 

42,949

 

 

 

(1,472

)

 

 

(3.4

)%

Surgeries (f)

 

 

17,843

 

 

 

18,241

 

 

 

(398

)

 

 

(2.2

)%

Emergency room visits (g)

 

 

127,828

 

 

 

129,167

 

 

 

(1,339

)

 

 

(1.0

)%

Medicare case mix index (h)

 

 

1.46

 

 

 

1.45

 

 

 

0.01

 

 

 

0.7

%

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

Variance

 

 

% Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of licensed beds at end of period (c)

 

 

2,458

 

 

 

2,649

 

 

 

(191

)

 

 

(7.2

)%

Admissions (d)

 

 

34,109

 

 

 

38,749

 

 

 

(4,640

)

 

 

(12.0

)%

Adjusted admissions (e)

 

 

85,016

 

 

 

94,779

 

 

 

(9,763

)

 

 

(10.3

)%

Surgeries (f)

 

 

34,632

 

 

 

39,701

 

 

 

(5,069

)

 

 

(12.8

)%

Emergency room visits (g)

 

 

260,556

 

 

 

289,186

 

 

 

(28,630

)

 

 

(9.9

)%

Medicare case mix index (h)

 

 

1.47

 

 

 

1.44

 

 

 

0.03

 

 

 

2.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-facility: (i)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of licensed beds at end of period (c)

 

 

2,458

 

 

 

2,458

 

 

 

 

 

 

%

Admissions (d)

 

 

33,485

 

 

 

35,778

 

 

 

(2,293

)

 

 

(6.4

)%

Adjusted admissions (e)

 

 

83,254

 

 

 

86,821

 

 

 

(3,567

)

 

 

(4.1

)%

Surgeries (f)

 

 

34,234

 

 

 

36,133

 

 

 

(1,899

)

 

 

(5.3

)%

Emergency room visits (g)

 

 

255,262

 

 

 

263,638

 

 

 

(8,376

)

 

 

(3.2

)%

Medicare case mix index (h)

 

 

1.47

 

 

 

1.44

 

 

 

0.03

 

 

 

2.1

%

 
 
 
 

QUORUM HEALTH CORPORATION
UNAUDITED CONSOLIDATED SELECTED OPERATING DATA

 

 

 

Three Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

$ Variance

 

 

% Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net patient revenues

 

$

423,871

 

 

$

449,261

 

 

$

(25,390

)

 

 

(5.7

)%

Non-patient revenues

 

 

18,299

 

 

 

23,371

 

 

 

(5,072

)

 

 

(21.7

)%

Total net operating revenues

 

$

442,170

 

 

$

472,632

 

 

$

(30,462

)

 

 

(6.4

)%

Net patient revenues per adjusted admission

 

$

10,165

 

 

$

9,863

 

 

$

302

 

 

 

3.1

%

Net operating revenues per adjusted admission

 

$

10,604

 

 

$

10,376

 

 

$

228

 

 

 

2.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-facility:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net patient revenues

 

$

424,150

 

 

$

435,307

 

 

$

(11,157

)

 

 

(2.6

)%

Non-patient revenues

 

 

18,255

 

 

 

23,206

 

 

 

(4,951

)

 

 

(21.3

)%

Total net operating revenues

 

$

442,405

 

 

$

458,513

 

 

$

(16,108

)

 

 

(3.5

)%

Net patient revenues per adjusted admission

 

$

10,226

 

 

$

10,135

 

 

$

91

 

 

 

0.9

%

Net operating revenues per adjusted admission

 

$

10,666

 

 

$

10,676

 

 

$

(10

)

 

 

(0.1

)%

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

$ Variance

 

 

% Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net patient revenues

 

$

846,053

 

 

$

913,857

 

 

$

(67,804

)

 

 

(7.4

)%

Non-patient revenues

 

 

38,922

...