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 (NYSE: 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
45,595
(6,673
)
(14.6
)%
Total net operating revenues
$
884,975
$
959,452
$
(74,477
)
(7.8
)%
Net patient revenues per adjusted
admission
$
9,952
$
9,642
$
310
3.2
%
Net operating revenues per adjusted
admission
$
10,410
$
10,123
$
287
2.8
%
Same-facility:
Net patient revenues
$
835,915
$
860,994
$
(25,079
)
(2.9
)%
Non-patient revenues
38,783
44,927
(6,144
)
(13.7
)%
Total net operating revenues
$
874,698
$
905,921
$
(31,223
)
(3.4
)%
Net patient revenues per adjusted
admission
$
10,041
$
9,917
$
124
1.3
%
Net operating revenues per adjusted
admission
$
10,506
$
10,434
$
72
0.7
%
QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands,
Except Par Value per Share and Shares)
June 30,
December 31,
2019
2018
ASSETS
Current assets:
Cash and cash equivalents
$
2,265
$
3,203
Patient accounts receivable
270,923
322,608
Inventories
41,447
45,646
Prepaid expenses
21,653
19,683
Due from third-party payors
57,071
63,443
Current assets of hospitals held for
sale
35,380
—
Other current assets
33,604
36,405
Total current assets
462,343
490,988
Property and equipment, net
496,555
559,438
Goodwill
391,658
401,073
Intangible assets, net
41,066
48,289
Operating lease right-of-use assets
84,854
—
Long-term assets of hospitals held for
sale
25,796
—
Other long-term assets
65,954
74,306
Total assets
$
1,568,226
$
1,574,094
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt
$
1,646
$
1,697
Current portion of operating lease
liabilities
23,797
—
Accounts payable
140,768
143,917
Accrued liabilities:
Accrued salaries and benefits
61,006
76,908
Accrued interest
10,517
10,024
Due to third-party payors
37,218
45,852
Current liabilities of hospitals held for
sale
10,675
—
Other current liabilities
38,573
43,336
Total current liabilities
324,200
321,734
Long-term debt
1,210,523
1,191,777
Long-term operating lease liabilities
61,554
—
Deferred income tax liabilities, net
6,978
6,736
Long-term liabilities of hospitals held
for sale
3,248
—
Other long-term liabilities
89,245
126,499
Total liabilities
1,695,748
1,646,746
Redeemable noncontrolling interests
2,278
2,278
Equity:
Quorum Health Corporation stockholders'
equity (deficit):
Preferred stock, $0.0001 par value per
share, 100,000,000 shares authorized, none issued
—
—
Common stock, $0.0001 par value per share,
300,000,000 shares authorized; 32,926,689 shares issued and
outstanding at June 30, 2019, and 31,521,398 shares issued and
outstanding at December 31, 2018
3
3
Additional paid-in capital
559,487
557,309
Accumulated other comprehensive income
(loss)
856
759
Accumulated deficit
(705,071
)
(648,464
)
Total Quorum Health Corporation
stockholders' equity (deficit)
(144,725
)
(90,393
)
Nonredeemable noncontrolling interests
14,925
15,463
Total equity (deficit)
(129,800
)
(74,930
)
Total liabilities and equity
$
1,568,226
$
1,574,094
QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In
Thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Cash flows from operating activities:
Net income (loss)
$
(16,477
)
$
(25,941
)
$
(55,083
)
$
(124,428
)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization
14,500
17,142
29,139
35,403
Non-cash interest expense, net
2,380
2,723
4,319
4,534
Provision for (benefit from) deferred
income taxes
31
(511
)
121
25
Stock-based compensation expense
1,194
2,756
2,964
5,220
Impairment of long-lived assets and
goodwill
25,950
—
34,810
39,760
Loss (gain) on sale of hospitals, net
1,140
307
1,140
8,122
Non-cash portion of loss (gain) on
hospital closures
—
1,089
(567
)
6,394
Changes in reserves for self-insurance
claims, net of payments
(29,963
)
4,355
(25,803
)
10,380
Other non-cash expense (income), net
116
56
(1,256
)
7
Changes in operating assets and
liabilities, net of acquisitions and divestitures:
Patient accounts receivable
22,766
19,645
18,780
21,074
Due from and due to third-party payors,
net
2,159
19,761
(2,262
)
20,978
Inventories, prepaid expenses and other
current assets
(5,143
)
(1,519
)
(232
)
(229
)
Accounts payable and accrued
liabilities
(28,930
)
(19,301
)
(8,784
)
(9,714
)
Long-term assets and liabilities, net
(117
)
(3,368
)
398
(2,925
)
Net cash provided by (used in) operating
activities
(10,394
)
17,194
(2,316
)
14,601
Cash flows from investing activities:
Capital expenditures for property and
equipment
(9,819
)
(10,791
)
(18,111
)
(25,319
)
Capital expenditures for software
(2,326
)
(531
)
(3,517
)
(1,044
)
Acquisitions, net of cash acquired
—
(26
)
(455
)
(58
)
Proceeds from the sale of hospitals
11,741
507
11,741
39,170
Other investing activities, net
(2,112
)
52
(383
)
249
Net cash provided by (used in) investing
activities
(2,516
)
(10,789
)
(10,725
)
12,998
Cash flows from financing activities:
Borrowings under revolving credit
facilities
175,000
115,000
327,000
247,000
Repayments under revolving credit
facilities
(149,000
)
(119,000
)
(299,000
)
(233,000
)
Borrowings of long-term debt
25
55
186
67
Repayments of long-term debt
(12,130
)
(30,820
)
(13,963
)
(31,447
)
Payments of debt issuance costs
—
—
—
(2,268
)
Cancellation of restricted stock awards
for payroll tax withholdings on vested shares
(103
)
(1,309
)
(564
)
(1,943
)
Cash distributions to noncontrolling
investors
(333
)
—
(1,556
)
(803
)
Net cash provided by (used in) financing
activities
13,459
(36,074
)
12,103
(22,394
)
Net change in cash, cash equivalents and
restricted cash
549
(29,669
)
(938
)
5,205
Cash, cash equivalents and restricted cash
at beginning of period
1,716
40,491
3,203
5,617
Cash, cash equivalents and restricted cash
at end of period
$
2,265
$
10,822
$
2,265
$
10,822
FOOTNOTES TO UNAUDITED FINANCIAL STATEMENTS
AND SELECTED OPERATING DATA
(a) EBITDA is a non-GAAP financial measure that consists of net
income (loss) before interest, income taxes, depreciation and
amortization. Adjusted EBITDA, also a non-GAAP financial measure,
is EBITDA adjusted to add back the effect of certain legal,
professional and settlement costs, impairment of long-lived assets
and goodwill, net loss (gain) on sale of hospitals, net loss on
closure of hospitals, transition of transition services agreements
(“TSAs”), change in actuarial estimates and headcount reductions
and executive severance. Change in actuarial estimates refers to
the previously discussed impact of a change in estimate for the
Company's professional and general liability reserves for periods
prior to the current reporting period. The Company uses Adjusted
EBITDA as a measure of financial performance. Adjusted EBITDA is a
key measure used by the Company’s management to assess the
operating performance of its hospital operations business and to
make decisions on the allocation of resources. Additionally,
management utilizes Adjusted EBITDA in assessing the Company’s
results of operations and in comparing the Company’s results of
operations between periods. Same-facility Adjusted EBITDA, also a
non-GAAP financial measure, is further adjusted to exclude the
effect of EBITDA of hospitals either sold or closed as of June 30,
2019. The Company has presented Adjusted EBITDA and Same-facility
Adjusted EBITDA in this press release because it believes these
measures provide investors and other users of the Company’s
financial statements with additional information about how the
Company’s management assesses its results of operations.
Adjusted EBITDA and Same-facility Adjusted EBITDA are not
measurements of financial performance under U.S. GAAP. These
calculations should not be considered in isolation or as a
substitute for net income, operating income or any other measure
calculated in accordance with U.S. GAAP. The items excluded from
Adjusted EBITDA and Same-facility Adjusted EBITDA are significant
components in understanding and evaluating the Company’s financial
performance. The Company believes such adjustments are appropriate,
as the magnitude and frequency of such items can vary significantly
and are not related to the assessment of the Company’s normal
operating performance. Additionally, the Company’s calculation of
Adjusted EBITDA and Same-facility Adjusted EBITDA may not be
comparable to similarly titled measures reported by other
companies.
The following table reconciles Adjusted EBITDA and Same-facility
Adjusted EBITDA, each as defined above, to net income (loss), the
most directly comparable U.S. GAAP financial measure, as derived
directly from the Company’s consolidated statements of income for
the respective periods (in thousands):
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Net income (loss)
$
(16,477
)
$
(25,941
)
$
(55,083
)
$
(124,428
)
Interest expense, net
33,582
31,926
65,848
62,857
Provision for (benefit from) income
taxes
94
(454
)
249
(88
)
Depreciation and amortization
14,500
17,142
29,139
35,403
EBITDA
31,699
22,673
40,153
(26,256
)
Legal, professional and settlement
costs
604
5,417
1,289
8,830
Impairment of long-lived assets and
goodwill
25,950
—
34,810
39,760
Loss (gain) on sale of hospitals, net
1,140
307
1,140
8,122
Loss on closure of hospitals, net
—
3,338
—
17,084
Transition of transition services
agreements
834
520
1,976
1,237
Change in actuarial estimates
(26,880
)
—
(26,880
)
—
Headcount reductions and executive
severance
82
4,068
1,572
5,966
Adjusted EBITDA
33,429
36,323
54,060
54,743
Negative EBITDA of divested hospitals
3,487
3,858
5,656
11,638
Same-facility Adjusted EBITDA
$
36,916
$
40,181
$
59,716
$
66,381
(b) The following table reconciles net income (loss)
attributable to Quorum Health Corporation, as reported and on a per
share basis, with the adjustments described herein:
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
(per share - basic and
diluted)
(per share - basic and
diluted)
Earnings (loss) per share attributable to
Quorum Health Corporation stockholders, as reported
$
(0.56
)
$
(0.92
)
$
(1.88
)
$
(4.37
)
Adjustments:
Legal, professional and settlement
costs
0.02
0.18
0.04
0.31
Impairment of long-lived assets and
goodwill
0.87
—
1.18
1.38
Loss (gain) on sale of hospitals, net
0.04
0.01
0.04
0.28
Loss on closure of hospitals, net
—
0.11
—
0.58
Transition of transition services
agreements
0.03
0.02
0.07
0.04
Change in actuarial estimates
(0.90
)
—
(0.91
)
—
Headcount reductions and executive
severance
—
0.14
0.05
0.21
Net operating losses of divested
hospitals
0.12
0.13
0.19
0.39
Earnings (loss) per share attributable to
Quorum Health Corporation stockholders, excluding adjustments
$
(0.38
)
$
(0.33
)
$
(1.22
)
$
(1.18
)
(c) Licensed beds are the number of beds for which the
appropriate state agency licenses a hospital, regardless of whether
the beds are actually available for patient use. (d) Admissions
represent the number of patients admitted for inpatient services.
(e) Adjusted admissions are computed by multiplying admissions by
gross patient revenues and then dividing that number by gross
inpatient revenues. (f) Surgeries represent the number of inpatient
and outpatient surgeries. (g) Emergency room visits represent the
number of patients registered and treated in the Company’s
emergency rooms. (h) Medicare case mix index is a relative value
assigned to a diagnosis-related group of patients that is used in
determining the allocation of resources necessary to treat the
patients in that group. Medicare case mix index is calculated as
the average case mix index for all Medicare admissions during the
period. (i) Same-facility financial and operating data excludes
hospitals that were sold or closed prior to and as of the end of
the current reporting period. Same-facility operating results have
been adjusted to exclude the operating results of the following
hospitals and their affiliated facilities: Sandhills Regional
Medical Center, Barrow Regional Medical Center, Cherokee Medical
Center, Trinity Hospital of Augusta, Lock Haven Hospital, Sunbury
Community Hospital, L.V. Stabler Memorial Hospital, Affinity
Medical Center, Vista Medical Center West, Clearview Regional
Medical Center, McKenzie Regional Hospital and Scenic Mountain
Medical Center which were sold or closed on December 1, 2016,
December 31, 2016, March 31, 2017, June 30, 2017, September 30,
2017, September 30, 2017, October 31, 2017, February 11, 2018,
March 1, 2018, March 31, 2018, September 30, 2018 and April 12,
2019, respectively.
Forward-Looking Statements
The terms “QHC,” “Quorum Health,” “the Company,” “we,” “us” or
“our” refer to Quorum Health Corporation or one or more of its
subsidiaries or affiliates as applicable.
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995
that involve risk and uncertainties. All statements in this press
release other than statements of historical fact, including
statements regarding projections, expected operating results, and
other events that depend upon or refer to future events or
conditions or that include words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “estimates,” “thinks,” “outlook,”
and similar expressions, are forward-looking statements. Although
the Company believes that these forward-looking statements are
based on reasonable assumptions, these assumptions are inherently
subject to significant economic and competitive uncertainties and
contingencies, which are difficult or impossible to predict
accurately and may be beyond the control of the Company.
Accordingly, the Company cannot give any assurance that its
expectations will in fact occur and cautions that actual results
may differ materially from those in the forward-looking statements.
A number of factors could affect the future results of the Company
or the healthcare industry generally and could cause the Company’s
expected results to differ materially from those expressed in this
press release.
These factors include, but are not limited to, the
following:
- general economic and business conditions, both nationally and
in the regions in which we operate;
- risks associated with our substantial indebtedness, leverage
and debt service obligations, including our ability to comply with
our debt covenants, including our senior credit facility, as
amended;
- our ability to successfully complete divestitures and the
timing thereof, our ability to complete any such divestitures on
desired terms or at all, and our ability to realize the intended
benefits from any such divestitures;
- changes in reimbursement methodologies and rates paid by
federal or state healthcare programs, including Medicare and
Medicaid, or commercial payors, and the timeliness of reimbursement
payments, including delays in certain states in which we
operate;
- the extent to which regulatory and economic changes occur in
Illinois, where a material portion of our revenues are
concentrated;
- demographic changes;
- the impact of changes made to the Affordable Care Act, the
potential for repeal or additional changes to the Affordable Care
Act, its implementation or its interpretation, as well as changes
in other federal, state or local laws or regulations affecting the
healthcare industry;
- increases in the amount and risk of collectability of patient
accounts receivable, including lower collectability levels which
may result from, among other things, self-pay growth and
difficulties in collecting payments for which patients are
responsible, including co-pays and deductibles;
- competition;
- changes in medical or other technology;
- any potential impairments in the carrying values of long-lived
assets and goodwill or the shortening of the useful lives of
long-lived assets;
- the costs associated with the transition of the transition
services agreements (“TSAs”) with CHS, as well as the additional
costs and risks associated with any operational problems, delays in
collections from payors, and errors and control issues during the
termination and transition process, and our ability to realize the
intended benefits from transitioning the transition services
agreements;
- our ability to timely and effectively implement, transition,
and maintain the necessary information technology systems and
infrastructure to support our operations and initiatives;
- the impact of certain outsourcing functions, and the ability of
CHS, as current provider of our billing and collection services
pursuant to the Shared Service Centers Transition Services
Agreement, and R1 RCM, as future provider of our revenue cycle
management services, to timely and appropriately bill and
collect;
- our ability to manage effectively our arrangements with
third-party vendors for key non-clinical business functions and
services;
- our ability to achieve operating and financial targets and to
control the costs of providing services if patient volumes are
lower than expected;
- our ability to achieve and realize the operational and
financial benefits expected from our margin improvement
program;
- the effects related to outbreaks of infectious diseases;
- our ability to attract and retain, at reasonable employment
costs, qualified personnel, key management, physicians, nurses and
other healthcare workers;
- the impact of seasonal or severe weather conditions or
earthquakes;
- increases in wages as a result of inflation or competition for
highly technical positions and rising medical supply and drug costs
due to market pressure from pharmaceutical companies and new
product releases;
- our ongoing ability to maintain and utilize certified EHR
technology;
- the efforts of healthcare insurers, providers, large employer
groups and others to contain healthcare costs, including the trend
toward treatment of patients in less acute or specialty healthcare
settings and the increased emphasis on value-based purchasing;
- the failure to comply with governmental regulations;
- our ability, where appropriate, to enter into, maintain and
comply with provider arrangements with payors and the terms of
these arrangements, which may be impacted by the increasing
consolidation of health insurers and managed care companies and
vertical integration efforts involving payors and healthcare
providers;
- the potential adverse impact of known and unknown government
investigations, internal investigations, audits, and federal and
state false claims act litigation and other legal proceedings,
including the shareholder litigation against our company and
certain of our officers and directors, the labor and employment
litigations and threats of litigation, as well as the significant
costs and attention from management required to address such
matters;
- liabilities and other claims asserted against us, including
self-insured malpractice claims;
- the impact of cyber-attacks or security breaches, including,
but not limited to, the compromise of our facilities and
confidential patient data, potential harm to patients, remediation
and other expenses, potential liability under the Health Insurance
Portability and Accountability Act of 1996, or HIPAA, and consumer
protection laws, federal and state governmental inquiries, and
damage to our reputation;
- our ability to utilize our income tax loss carryforwards;
- our ability to maintain certain accreditations at our
facilities;
- the success and long-term viability of healthcare insurance
exchanges and potential changes to the beneficiary enrollment
process;
- the extent to which states support or implement changes to
Medicaid programs, utilize healthcare insurance exchanges or alter
the provision of healthcare to state residents through regulation
or otherwise;
- the timing and amount of cash flows related to the California
Hospital Quality Assurance Fee (“HQAF”) program, as well as the
potential for retroactive adjustments for prior year payments;
- the effects related to the continued implementation of the
sequestration spending reductions and the potential for future
deficit reduction legislation;
- changes in U.S. generally accepted accounting principles,
including the impacts of adopting newly issued accounting
standards;
- the availability and terms of capital to fund capital
expenditures;
- our ability to obtain adequate levels of professional and
general liability and workers’ compensation liability insurance;
and
- the other risk factors set forth in the Company’s other public
filings with the Securities and Exchange Commission.
Although we believe that these forward-looking statements are
based upon reasonable assumptions, these assumptions are inherently
subject to significant regulatory, economic and competitive
uncertainties and contingencies, which are difficult or impossible
to predict accurately and may be beyond our control. Accordingly,
we cannot give any assurance that our expectations will in fact
occur and caution that actual results may differ materially from
those in the forward-looking statements. Given these uncertainties,
prospective investors are cautioned not to place undue reliance on
these forward-looking statements. These forward-looking statements
are made as of the date of this filing. We undertake no obligation
to revise or update any forward-looking statements, or to make any
other forward-looking statements, whether as a result of new
information, future events or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190807005845/en/
Investor Contact: Asher Dewhurst Westwicke Partners
QuorumHealth@Westwicke.com (443) 213-0500
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