← Becker’s Healthcare Podcast
Becker’s Healthcare Podcast
Nonprofit System Financial Pressures and Major M&A Moves with Alan Condon
00:07:22
Loading summary
Transcript6 lines
- [00:00]
A
This is Scott Becker with the Beckers Healthcare podcast. I am thrilled today to be visiting with Editor in Chief at Becker's Healthcare, Alan Condon. Alan's literally remarkable. So thank you for joining us. Alan talks to us regularly about some of the issues that he's watching, particularly on the financial side with healthcare and healthcare systems. Alan, I'll turn it to you. What are a couple of the big stories that you're watching currently?
- [00:26]
B
Yeah, always a pleasure to be on with you, Scott. So I think ton going on in healthcare, specifically healthcare finance at the moment. So to narrow it down, I guess first and foremost just taking a bit of a broad look at nonprofit health systems financials after we've just reported on Q3 results from Providence, from Trinity, Common Spirit and Ascension. So I think taking these four nonprofit giants as a foursome here to kind of dive into some key takeaways. What we've seen really is that these quarterly results from Q3 really shine a light on a hospital sector that's still caught somewhere between progress and pressure. So despite some signs of stabilization across the board, I think those four systems, like many, many other hospitals and systems across the country, continue to wrestle with inflation, lagging reimbursement, really the long tail of labor and supply chain strain as well. And of course, unfortunately doesn't seem to be much respite coming down the pipeline when we think about impending Medicaid costs 20, 26, 27 and a lot of looming uncertainty around ACA subsidies at the moment too. But I think just a couple of key takeaways from the Q3 results across the board here. Trinity Health and Providence turned modest operating profits in Q3 while common spirit and Ascension continued to post losses, though trimmed their operating losses compared to the same quarter of 2024. All four systems did so some sort of improvement year over year. Trinity posted the strongest results of the four systems with a 1.2% operating margin, mainly driven by stronger volumes, better payment rates at some of their payers, improved payer mix despite somewhat of a dip in surgical volumes. Contract labor, however, continues to be a challenge for many systems and is actually up year over year in Q3 for Trinity Health as well. Actually speaking with Trinity CEO Mike Slabowski next week on a number of high priority areas and this of course contract labor being one of them. So looking to get a little bit more insight into how they're pushing back against that trend there and then just to kind of dive into Providence, we know has ton of financial challenges over recent quarters. Recent years has really been working hard under their leadership team to drive down some of these operating losses that they've seen. So again it reported about a 200 million operating loss last year, turned that into a 21 million operating gain. Operating margins in Q3 remain thin, but the good news is back out of the red into the black around a 0.3% operating margin for Providence. So real fantastic leadership there. Really disciplined cost control, targeted improvements across the board. And then lastly, just to pull out couple points on Common Spirit and Ascension, they trimmed some of their operating losses but did still report are still in the red as of Q3. Common spirit leadership team really, really working hard to get back in the black a number of improvement areas but again consistently reports payer denials, inflation, delayed payments, slow payments from insurers as key key headwinds that are really pushing back against some of its improvements areas. Lastly, Accenture managed to narrow its operating loss to about 88 million. Really helps by growing ambulatory care, lower length of stay across the board, some really strict cost control and areas of improvement there. So just a key little look at where we stand, where the nonprofit system stands. Some definite signs of progress across the board, some stabilization, but still some pressure across the sector and still some challenges. No doubt when we look ahead to 2026.
- [04:21]
A
Thank you so much. Fascinating about Trinity Health, which I think is a great one system and Providence Health, great system too. What other stories are you watching currently right now? Is there another story that you're watching currently closely?
- [04:36]
B
Yeah, absolutely. I think to jump over to kind of some of the there's been a ton of M and A activity over the recent quarters, but I think just to pick out one particular story, one of the most recent stories we covered spoke to the CEO and the CFO of WVU Health System headquartered in West Virginia. They operate in five states. Significant announcement where they plan to acquire Independence Health in Pennsylvania. This is a 5 hospital system in Pennsylvania. I think what makes this particular transaction quite interesting, WVU Multi state system operates in West Virginia, Maryland, Ohio and Virginia. This System, it operates one hospital currently in Pennsylvania, 25 hospitals across its entire footprint, one hospital in Pennsylvania. But this acquisition would see it significantly expand its footprint in Pennsylvania from one hospital to six hospital system. Expects this deal to get over the finish line potentially in mid-2026. Really grown from a 25 hospital system to a 30 hospital system, five states. It's injecting about $800 million of capital into this deal. Should it get over the line modernizing some of these hospitals facilities, a number of outpatient facilities and physician clinics also come with this, this health system acquisition and then a big, big journey to potentially modernize some of our facilities as well as implement the EPIC EHR system across the board at those five independent health hospitals in Pennsylvania. So Independence Health, just for a quick little bit of background there, it was formed through the merger of Butler Health System and accela health in 2023, but since then still has been serious financial challenges. It gives Pennsylvania one of the most difficult states to operate in, I believe at the moment. The highest states of hospital closures over the last couple of years. And following on from that, one of the states that received the most M and A activity, the most hospital sales, the most potential hospital acquisitions as well. So big, big deal in the works. Not over the finish line yet, of course, just announced, but something to certainly keep an eye on as we look ahead into 2026 and the serious growth of WVU. Fantastic academic health system.
- [06:57]
A
Alan, I'm so happy to hear you mention WVU Medicine and their CEO Albert Wright. We had a chance at the CEO CFO Roundtable to visit on a panel with Albert Wright, and it's amazing what they've done with WVU Medicine and sort of making that one of the crown jewels in the nation and in West Virginia. Just a pleasure to visit there.
- [07:18]
B
Thank you so much, Scott. Always a pleasure.