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Health Care & Life Sciences / Life Science & Biotech

Moody’s likes what it sees at Community

May 4, 2015

Profit tripled at Community Health Network last year, prompting Moody’s Investors Service to boost its outlook to positive on the hospital system’s bonds.

Moody’s analysts reported April 30 that Community’s profits have risen even further during the first quarter of 2015, giving them confidence that Community’s finances will remain strong.

“The turnaround in [fiscal year] 2014 was driven by both expense reduction and revenue enhancing initiatives,” wrote Moody’s analysts Jennifer Ewing and Lisa Martin. “We expect the improved results to be sustained based on management’s strategies to grow revenue and reduce expenses.”

Community, which operates eight hospitals in Indianapolis, Anderson and Kokomo, is the last of the four major Indianapolis-area hospital systems to report strong financial results in 2014. Profit last year rose 72 percent at St. Vincent Health, doubled at Indiana University Health and quintupled at Franciscan Alliance.

Net income from operations totaled $161.9 million last year, up from $54.2 million in 2013. Excluding differences between the two years in special payments from the Medicaid and Medicare programs, Community would have earned, $167.6 million—or 209 percent more than it did the previous year.

Community's operations generated cash equal to 13.6 percent of its operating revenue last year, up from a rate of 8.8 percent the previous year, according to Moody's. In the first quarter of 2015, that rate went up to 14.3 percent.

Revenue for all of 2014 rose 10 percent to more than $1.9 billion. A big chunk of that came from a 6 percent price increase Community passed along to commercial insurance plans.

But Community also continued to bring in more patients in most areas, especially to its more than 500 employed physicians.

Physician work, measured by something called relative value units, shot up 23 percent last year among Community’s employed physicians. Imaging scans rose 4 percent and emergency room visits and births each rose about 6 percent.

Inpatient admissions fell less than 1 percent but still remained higher than 2012 levels. Inpatient surgeries were flat, but outpatient surgeries actually fell, by 3 percent.

After a spike in unpaid bills in 2013, Community saw its bad debt levels fall to 4.4 percent of gross patient revenue, down from 5.7 percent the previous year.

Community recorded $20 million more in revenue due to revenue cycle improvements, according to Moody’s, and saved $9 million on supply chain costs. One reason Moody’s did not lift its A2 rating on Community’s bonds is that the hospital system drew $150 million from its line of credit in April and is considering issuing as much as $50 million in additional debt later this year.

Community’s financial results were also helped by trimming its full-time equivalent staff by 153 people during the year. The hospital system cut more 400 clinical and acute-care hospital staff. But Community also added more corporate and physician network staff because it hired more physicians, and transferred the physician office staff from Westview and Howard Regional hospitals onto its books.

Community’s overall expenses for salaries, benefits and pensions was essentially flat at $1 billion.

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