Not-for-profit Tower Well being is embarking on an aggressive cost-cutting program to stem losses that would embody promoting its Philadelphia-area hospitals.
West Studying, Penn.-based Tower posted a staggering $439 million working loss on $1.9 billion in income in fiscal 2020, which ended June 30, a -22.9% margin. Executives informed bondholders on a Nov. 10 name that the COVID-19 pandemic took a hefty toll on the not-for-profit system’s funds.
Tower had been shedding cash earlier than the pandemic, nonetheless, having posted a -10.2% margin in fiscal 2019. The information that Tower might shed hospitals follows credit score downgrades from Fitch Rankings and S&P International Rankings in October.
Clint Matthews, Tower’s CEO, mentioned on the decision that the well being system secured a restructuring marketing consultant, Guidehouse, final week. He mentioned Tower has taken a lot of steps to chop prices, together with shuttering service strains in some areas similar to a maternity unit, sports activities medication program and detox middle. Tower can also be suspending strategic tasks and laid off about 780 staff in June, Matthews mentioned.
However executives on the decision acknowledged these efforts will not be sufficient. They mentioned they’re taking a look at strategic choices, together with gross sales, for the 5 acute-care hospitals Tower purchased from for-profit Neighborhood Well being Programs in 2017 in Chester, Montgomery and Philadelphia counties. These 5 hospitals misplaced a mixed $235 million in fiscal 2020.
Executives additionally referenced the underperformance of St. Christopher’s Hospital for Kids in Philadelphia, which it acquired out of chapter below a partnership with Drexel College. That hospital generated $three.2 million in working revenue in fiscal 2020. Jessica Belzer, a spokeswoman for Tower, declined to say whether or not St. Christopher’s is among the many hospitals on the chopping block.
Tom Work, Tower’s board chairman, mentioned the well being system’s determination to accumulate the CHS hospitals and St. Christopher’s was a strategic transfer made utilizing the “absolute best recommendation and best possible motives.”
“There are good selections, there are unhealthy selections, there are ones by which you second guess what you’ve executed,” he mentioned.
Tower is not alone in struggling to earn cash off its former CHS hospitals. Practically 80% of the hospitals CHS has bought lately are working at a loss, bankrupt or closed, in accordance with a Fashionable Healthcare evaluation from February.
Tower’s “mothership” Studying Hospital, a instructing hospital in its West Studying headquarters, is doing nicely and never on the chopping block, Matthews mentioned. Studying Hospital generated $66.6 million in working revenue in fiscal 2020.
Dan Ahern, Tower’s govt vp of technique and enterprise growth, mentioned Tower is in talks with “a number of strategic companions” concerning its so-called “Challenge Phillies” initiative, which may embody promoting the hospitals. He mentioned his crew expects to suggest choices by the top of calendar 2020, with offers consummated within the first half of 2021. H2C is serving as Tower’s monetary advisor on that challenge.
If Tower cannot discover consumers for the previous CHS hospitals, Ahern mentioned the well being system will think about all choices, together with closing or repurposing them.