Quorum Health Corporation (NYSE: QHC) (the “Company”) today
announced its operating and financial results for the three months
and year ended December 31, 2017.
Net operating revenues for the three months ended December 31,
2017 decreased $0.2 million to $515.1 million, compared to $515.3
million for the same period in 2016. Net operating revenues for the
quarter decreased $44.8 million from the two hospitals divested in
2016 and the five hospitals divested in 2017 (collectively, “the
divested hospitals”), which was partially offset by a benefit of
$29.9 million of revenues from the California Hospital Quality
Assurance Fee (“HQAF”) program as the program approval process for
Centers for Medicare & Medicaid Services (“CMS”) for the
2017-2019 period was completed in the fourth quarter of 2017, of
which $22.5 million related to the first three quarters of 2017.
Excluding the divested hospitals and the California HQAF revenues
of $22.5 million related to the first three quarters of 2017, net
operating revenues increased $22.1 million in the three months
ended December 31, 2017 compared to the same period in 2016,
primarily due to favorable volume and payor rate variances. Net
loss for the three months ended December 31, 2017 was $(26.0)
million compared to $(90.1) million for the same period in 2016.
Net loss attributable to Quorum Health Corporation for the three
months ended December 31, 2017 was $(26.8) million, or $(0.95) per
share, compared to $(90.7) million, or $(3.19) per share, for the
same period in 2016. The net loss for the three months ended
December 31, 2017 was impacted by $25.8 million of impairment
related to certain hospitals intended for divestiture. On a
same-facility basis, as defined in footnote (k), the Company’s
operating results for the three months ended December 31, 2017
reflect a 0.4% increase in admissions and a 0.6% increase in
adjusted admissions compared to the same period in 2016.
As of December 31, 2017, the Company recorded a change in
estimate of $21.0 million to reduce the net realizable value of its
patient accounts receivable. During the fourth quarter of 2017, the
Company analyzed self-pay patient accounts receivable at a more
comprehensive and disaggregated level and refined its estimate of
the collectability of the portion of self-pay accounts receivable
related to insured patients, primarily co-payments and deductibles.
The Company’s analysis also included an evaluation of patient
accounts receivable retained in the divestitures of six of the
Company’s seven divested hospitals. This adjustment negatively
impacted the provision for bad debts in the net operating revenues
components of the statement of income for both the three months and
year ended December 31, 2017.
Adjusted EBITDA for the three months ended December 31, 2017 was
$49.0 million, compared to $30.7 million for the same period in
2016. Adjusted EBITDA was positively impacted by the Company’s
ability to accrue for the California HQAF program in the 2017
period, as stated above. The divested hospitals negatively impacted
EBITDA by $5.1 million and $13.1 million for the three months ended
December 31, 2017 and 2016, respectively. As a result, Adjusted
EBITDA, Adjusted for Divestitures, was $54.1 million and $43.9
million for the three months ended December 31, 2017 and 2016,
respectively.
Net operating revenues for the year ended December 31, 2017
decreased $66.3 million to $2,072.2 million, compared to $2,138.5
million for the same period in 2016. Net operating revenues
decreased $108.8 million related to the divested hospitals and
decreased $15.4 million related to the California HQAF program.
Excluding the divested hospitals and the California HQAF, net
operating revenues increased $57.9 million for the year ended
December 31, 2017 compared to the same period in 2016, primarily
due to favorable volume and payor rate variances. Net loss for the
year ended December 31, 2017 was $(112.4) million compared to
$(345.2) million for the same period in 2016. Net loss attributable
to Quorum Health Corporation for the year ended December 31, 2017
was $(114.2) million, or $(4.06) per share, compared to $(347.7)
million, or $(12.24) per share, for the same period in 2016. The
2017 period included impairment of $47.3 million related to
hospitals held for sale or identified for potential divestiture and
a net gain of $5.2 million on the sale of hospitals. The 2016
period included $291.9 million of impairment, $5.5 million of
transaction costs related to the spin-off from Community Health
Systems, Inc. in April 2016 (the “Spin-off”) and a net loss of $2.1
million on the sale of hospitals. On a same-facility basis, the
Company’s operating results for the year ended December 31, 2017
reflect a 0.5% decrease in admissions and a 0.4% increase in
adjusted admissions compared to the same period in 2016.
Adjusted EBITDA for the year ended December 31, 2017 was $141.8
million, compared to $162.9 million for the same period in 2016.
The divested hospitals negatively impacted EBITDA by $20.6 million
and $33.1 million for the years ended December 31, 2017 and 2016,
respectively. As a result, Adjusted EBITDA, Adjusted for
Divestitures was $162.5 million and $196.0 million for the years
ended December 31, 2017 and 2016, respectively.
As of December 31, 2017, the Company had combined net proceeds
from seven hospital divestitures of $45.9 million, of which $44.4
million was utilized to pay down the Company’s term loan under its
Senior Credit Facility. In addition, in October 2017, the Company
received approximately $31 million from the State of California
related to the 2015-2016 HQAF Program, a portion of which was
utilized to pay down additional principal on the Company’s term
loan. On March 14, 2018, the Company executed an agreement with its
lenders pursuant to its Senior Credit Facility to amend the
calculation of the Secured Net Leverage Ratio beginning July 1,
2017 through maturity, among other provisions.
Commenting on the results, Thomas D. Miller, President and Chief
Executive Officer of Quorum Health Corporation, said, “With eight
divestiture transactions completed as of today and more expected in
2018, we are executing on our strategy to pay down debt in
alignment with our key strategic goals. We’re seeing volume
improvements in core hospitals, primarily as a result of physician
recruiting efforts in specialty areas. We also continue to strongly
focus on quality and safety and are very proud of the
accomplishments of our physicians and nurses in their efforts to
improve safety and quality in their community hospitals.”
Financial Outlook
Set forth below is selected information concerning the Company’s
financial outlook for the year ending December 31, 2018. 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. The 2018 guidance should be considered in conjunction
with the assumptions included herein. See “Forward-Looking
Statements” below for a list of factors that could affect the
future results of the Company or the healthcare industry
generally.
The Company expects net operating revenues for the year ending
December 31, 2018 to range from $1.925 billion to $1.975 billion.
The Company expects Adjusted EBITDA for the year ending December
31, 2018 to range from $145 million to $165 million and Adjusted
EBITDA, Adjusted for Divestitures to range from $160 million to
$180 million. The guidance for Adjusted EBITDA gives effect to: (i)
approximately $23 million of California HQAF revenues, net of
provider taxes, (ii) the reduction of approximately $3 million in
electronic health records incentives earned in 2018 compared to
2017, (iii) the inclusion of approximately $10 million to $12
million of non-cash stock-based compensation and other non-cash
benefits expense and approximately $20 million to $25 million of
non-cash insurance expense, and (iv) no estimate for the effects of
any changes to the Affordable Care Act, its interpretation or its
implementation. The guidance for Adjusted EBITDA, Adjusted for
Divestitures through December 31, 2018 includes the same
assumptions above, in addition to excluding the negative (positive)
EBITDA of hospitals divested and expected to be divested through
December 31, 2018.
A reconciliation of the Company’s projected 2018 Adjusted
EBITDA, and Adjusted EBITDA, Adjusted for Divestitures, each 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 December 31, 2017, the Company
owned or leased 31 hospitals in rural and mid-sized markets located
across 15 states and licensed for 2,979 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 Friday, March 16, 2018, at 10:00 a.m. Central
time, 11:00 a.m. Eastern, to review operating and financial results
for the three and twelve months ended December 31, 2017. Investors
will have the opportunity to listen to a live internet broadcast of
the conference call by clicking on the Investor Relations link of
the Company’s website at www.quorumhealth.com. To listen to the live call,
please go to the website at least 15 minutes early to register,
download and install any necessary audio software. 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)
are available on the Company’s website at www.quorumhealth.com.
QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED AND
COMBINED STATEMENTS OF INCOME (LOSS)
(In Thousands, Except Earnings per
Share and Shares)
Three Months Ended December 31,
2017 2016 % of
% of Amount Revenues
Amount Revenues Operating revenues, net of
contractual allowances and discounts (a) $ 596,648 $ 593,855
Provision for bad debts 81,566 78,615
Net operating revenues 515,082 100.0 %
515,240 100.0 % Operating costs and expenses:
Salaries and benefits (b) 253,106 49.1 % 268,559 52.1 % Supplies
63,932 12.4 % 66,829 13.0 % Other operating expenses (a) 156,669
30.5 % 163,276 31.8 % Depreciation and amortization 18,714 3.6 %
26,434 5.1 % Rent 13,599 2.6 % 11,966 2.3 % Electronic health
records incentives earned (229 ) — % (1,691 ) (0.3 )% Legal,
professional and settlement costs (518 ) (0.1 )% 1,166 0.2 %
Impairment of long-lived assets and goodwill 25,820 5.0 % 41,470
8.0 % Loss (gain) on sale of hospitals, net (131 ) — % 2,150 0.4 %
Transaction costs related to the Spin-off 49 — %
44 — % Total operating costs and expenses
531,011 103.1 % 580,203 112.6 % Income (loss)
from operations (15,929 ) (3.1 )% (64,963 ) (12.6 )% Interest
expense, net 31,873 6.2 % 28,684 5.6 %
Income (loss) before income taxes (47,802 ) (9.3 )% (93,647 ) (18.2
)% Provision for (benefit from) income taxes (21,779 ) (4.2
)% (3,555 ) (0.7 )% Net income (loss) (c) (26,023 ) (5.1 )%
(90,092 ) (17.5 )% Less: Net income (loss) attributable to
noncontrolling interests 785 0.1 % 574
0.1 % Net income (loss) attributable to Quorum Health Corporation $
(26,808 ) (5.2 )% $ (90,666 ) (17.6 )% Earnings (loss) per
share attributable to Quorum Health Corporation stockholders: Basic
and diluted (d) $ (0.95 ) $ (3.19 ) Weighted-average shares
outstanding: Basic and diluted (e) 28,248,527
28,416,801
QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED AND
COMBINED STATEMENTS OF INCOME (LOSS)
(In Thousands, Except Earnings per
Share and Shares)
Year Ended December 31, 2017
2016 % of
% of Amount Revenues Amount
Revenues Operating revenues, net of contractual
allowances and discounts (a) $ 2,327,655 $ 2,419,053 Provision for
bad debts 255,485 280,586
Net operating revenues 2,072,170 100.0 %
2,138,467 100.0 % Operating costs and expenses: Salaries and
benefits (b) 1,034,797 49.9 % 1,057,119 49.4 % Supplies 250,523
12.1 % 258,639 12.1 % Other operating expenses (a) 623,063 30.1 %
645,802 30.3 % Depreciation and amortization 82,155 4.0 % 117,288
5.5 % Rent 50,230 2.4 % 49,883 2.3 % Electronic health records
incentives earned (4,745 ) (0.2 )% (11,482 ) (0.5 )% Legal,
professional and settlement costs 6,001 0.3 % 7,342 0.3 %
Impairment of long-lived assets and goodwill 47,281 2.3 % 291,870
13.6 % Loss (gain) on sale of hospitals, net (5,243 ) (0.3 )% 2,150
0.1 % Transaction costs related to the Spin-off 253 —
% 5,488 0.3 % Total operating costs and expenses
2,084,315 100.6 % 2,424,099 113.4 %
Income (loss) from operations (12,145 ) (0.6 )% (285,632 ) (13.4 )%
Interest expense, net 122,077 5.9 % 113,440
5.3 % Income (loss) before income taxes (134,222 ) (6.5 )%
(399,072 ) (18.7 )% Provision for (benefit from) income taxes
(21,865 ) (1.1 )% (53,875 ) (2.6 )% Net income (loss)
(c) (112,357 ) (5.4 )% (345,197 ) (16.1 )% Less: Net income (loss)
attributable to noncontrolling interests 1,833 0.1 %
2,491 0.2 % Net income (loss) attributable to Quorum
Health Corporation (b) $ (114,190 ) (5.5 )% $ (347,688 ) (16.3 )%
Earnings (loss) per share attributable to Quorum Health
Corporation stockholders: Basic and diluted (d) $ (4.06 ) $ (12.24
) Weighted-average shares outstanding: Basic and diluted (e)
28,113,566 28,413,247
QUORUM HEALTH CORPORATION
UNAUDITED CONSOLIDATED AND COMBINED
SELECTED OPERATING DATA
Three Months Ended December 31,
2017 2016 $
Variance % Variance Consolidated
and combined: Number of licensed beds at end of period (f) 2,979
3,459
(480
)
(13.9
)%
Admissions (g) 20,932 23,200
(2,268
)
(9.8
)%
Adjusted admissions (h) 50,788 57,202
(6,414
)
(11.2
)%
Emergency room visits (i) 155,746 174,754
(19,008
)
(10.9
)%
Medicare case mix (j) 1.45 1.41 0.04 2.8 % Same-facility:
(k) Number of licensed beds at end of period (f) 2,979 2,979 — — %
Admissions (g) 20,864 20,788 76 0.4 % Adjusted admissions (h)
50,583 50,290 293 0.6 % Emergency room visits (i) 154,874 152,620
2,254 1.5 % Medicare case mix (j) 1.45 1.39 0.06 4.3 %
Year Ended December 31, 2017 2016 $
Variance % Variance Consolidated and combined:
Number of licensed beds at end of period (f) 2,979 3,459 (480 )
(13.9 )% Admissions (g) 88,504 95,313 (6,809 ) (7.1 )% Adjusted
admissions (h) 217,583 235,263 (17,680 ) (7.5 )% Emergency room
visits (i) 660,246 726,155 (65,909 ) (9.1 )% Medicare case mix (j)
1.43 1.38 0.05 3.6 % Same-facility: (k) Number of licensed
beds at end of period (f) 2,979 2,979 — — % Admissions (g) 84,459
84,905 (446 ) (0.5 )% Adjusted admissions (h) 205,905 205,110 795
0.4 % Emergency room visits (i) 622,049 631,346 (9,297 ) (1.5 )%
Medicare case mix (j) 1.43 1.39 0.04 2.9 %
QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS
(In Thousands, Except Par Value per
Share and Shares)
December 31, 2017
2016 ASSETS Current assets: Cash and cash
equivalents $ 5,617 $ 25,455 Patient accounts receivable, net of
allowance for doubtful accounts of $352,509 and $360,796 at
December 31, 2017 and 2016, respectively 343,145 380,685
Inventories 53,459 58,124 Prepaid expenses 21,167 23,028 Due from
third-party payors 97,202 116,235 Current assets of hospitals held
for sale 8,112 1,502 Other current assets 47,440
57,942 Total current assets 576,142
662,971 Property and equipment, at cost 1,405,184
1,519,975 Less: Accumulated depreciation and amortization
(729,905 ) (786,075 ) Total property and equipment, net
675,279 733,900 Goodwill 409,229 416,833 Intangible assets, net
64,850 84,982 Long-term assets of hospitals held for sale 7,734
6,851 Other long-term assets 95,607 88,833
Total assets $ 1,828,841 $ 1,994,370
LIABILITIES AND EQUITY Current liabilities: Current
maturities of long-term debt $ 1,855 $ 5,683 Accounts payable
171,250 169,684 Accrued liabilities: Accrued salaries and benefits
77,803 98,803 Accrued interest 10,466 19,915 Due to third-party
payors 47,705 42,537 Current liabilities of hospitals held for sale
2,577 492 Other current liabilities 43,687
53,268 Total current liabilities 355,343 390,382 Long-term
debt 1,212,035 1,241,142 Deferred income tax liabilities, net 7,774
31,474 Other long-term liabilities 137,954
108,996 Total liabilities 1,713,106
1,771,994 Redeemable noncontrolling interests 2,325
6,807 Equity:
Quorum Health Corporation stockholders’
equity:
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; 30,294,895 shares issued and
outstanding at December 31, 2017 and 29,482,050 shares issued and
outstanding at December 31, 2016 3 3 Additional paid-in capital
549,610 537,911 Accumulated other comprehensive income (loss)
(1,956 ) (2,760 ) Accumulated deficit (448,216 )
(334,026 )
Total Quorum Health Corporation
stockholders’ equity
99,441 201,128 Nonredeemable noncontrolling interests 13,969
14,441 Total equity 113,410
215,569 Total liabilities and equity $ 1,828,841
$ 1,994,370
QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED AND
COMBINED STATEMENTS OF CASH FLOWS
(In Thousands)
Year Ended December 31, 2017
2016 2015 Cash
flows from operating activities: Net income (loss) $ (112,357 ) $
(345,197 ) $ 4,735 Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities: Depreciation
and amortization 82,155 117,288 128,001 Non-cash interest expense
5,770 2,496 — Provision for (benefit from) deferred income taxes
(22,137 ) (56,339 ) 2,542 Stock-based compensation expense 9,952
7,441 — Impairment of long-lived assets and goodwill 47,281 291,870
13,000 Loss (gain) on sale of hospitals, net (5,243 ) 2,150 —
Changes in reserves for self-insurance claims, net of payments
22,519 27,994 — Changes in reserves for legal, professional and
settlement costs, net of payments (3,651 ) 3,651 — Other non-cash
expense (income), net 190 (575 ) 380 Changes in operating assets
and liabilities, net of acquisitions and divestitures: Patient
accounts receivable, net 29,091 10,205 (16,639 ) Due from and due
to third-party payors, net 24,201 7,005 (18,198 ) Inventories,
prepaid expenses and other current assets 673 1,457 8,000 Accounts
payable and accrued liabilities (14,743 ) 20,760 (78,944 )
Long-term assets and liabilities, net 3,269
(9,120 ) 12 Net cash provided by (used in) operating
activities 66,970 81,086 42,889
Cash flows from investing activities: Capital
expenditures for property and equipment (61,530 ) (79,920 ) (59,455
) Capital expenditures for software (6,898 ) (7,269 ) (8,845 )
Acquisitions, net of cash acquired (1,920 ) (785 ) (8,019 )
Proceeds from the sale of hospitals 32,081 13,746 — Proceeds from
asset sales — 1,082 3,114 Other investing activities —
— (5,387 ) Net cash provided by (used
in) investing activities (38,267 ) (73,146 )
(78,592 ) Cash flows from financing activities: Borrowings
under revolving credit facilities 508,000 50,000 — Repayments under
revolving credit facilities (508,000 ) (50,000 ) — Borrowings of
long-term debt 376 1,256,281 372 Repayments of long-term debt
(39,195 ) (15,222 ) (1,563 ) Increase in Due to Parent, net —
24,796 262,775 Increase (decrease) in receivables facility, net — —
(224,774 ) Payments of debt issuance costs (3,119 ) (29,146 ) —
Cash paid to Parent related to the Spin-off — (1,217,336 ) —
Cancellation of restricted stock awards for payroll tax
withholdings on vested shares (1,508 ) (13 ) — Cash distributions
to noncontrolling investors (3,851 ) (2,850 ) (1,623 ) Purchases of
shares from noncontrolling investors (1,244 ) (101 )
(937 ) Net cash provided by (used in) financing activities
(48,541 ) 16,409 34,250
Net change in cash and cash equivalents (19,838 ) 24,349 (1,453 )
Cash and cash equivalents at beginning of period 25,455
1,106 2,559 Cash and cash
equivalents at end of period $ 5,617 $ 25,455 $ 1,106
FOOTNOTES TO UNAUDITED FINANCIAL
STATEMENTS AND SELECTED OPERATING DATA
(a) The California Department of Health Care Services
implemented the HQAF program, imposing a fee on certain general and
acute care California hospitals. Revenues generated from these fees
provide funding for the non-federal supplemental payments to
California hospitals that serve California’s Medicaid (“Medi-Cal”)
and uninsured patients. Under Phase IV of the program, covering the
period January 2014 through December 2016, the Company recognized
$11.5 million of net operating revenues less $2.7 million of
provider taxes for the three months ended December 31, 2016. The
Company recognized $45.4 million of net operating revenues less
$11.0 million of provider taxes for the year ended December 31,
2016. In November 2016, California voters approved a state
constitutional amendment measure that extends indefinitely the
statute that imposes fees on California hospitals seeking federal
matching funds. However, Phase IV of the program expired on
December 31, 2016, and CMS approval was received in December 2017.
Consistent with the first four phases of the HQAF program, the
Company did not recognize any revenues under the new program until
CMS completed the approval process. The Company recognized $29.9
million of net operating revenues less $7.9 million of provider
taxes for the three months and year ended December 31, 2017. Of
this amount, $22.5 million of net operating revenues less $5.9
million of provider taxes related to the first three quarters of
2017 and $7.5 million of net operating revenues less $2.0 million
of provider taxes related to the three months ended December 31,
2017. (b) Salaries and benefits were impacted by a net
decrease in discretionary employee benefits as the Company
continues to implement cost savings plans. (c) 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, transaction costs related to the
Spin-off, post-spin headcount reductions and change in estimate
related to the collectability of patient accounts receivable. 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. Adjusted EBITDA, Adjusted
for Divestitures, also a non-GAAP financial measure, is further
retrospectively adjusted to exclude the effect of EBITDA of
hospitals divested in 2016 and 2017. Adjusted EBITDA, Adjusted for
Potential Divestitures, also a non-GAAP financial measure, is
further retrospectively adjusted to exclude the effect of EBITDA of
seven hospitals that management has identified for potential
divestiture over the next twelve to twenty four month period as of
December 31, 2017. The Company continually evaluates other
hospitals for potential divestiture, which could result in changes
to the hospitals included in this group in future periods. The
Company has presented Adjusted EBITDA and Adjusted EBITDA, Adjusted
for Divestitures and Adjusted EBITDA, Adjusted for Potential
Divestitures 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, Adjusted EBITDA, Adjusted for Divestitures and
Adjusted EBITDA, Adjusted for Potential Divestitures 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, Adjusted EBITDA, Adjusted for Divestitures and
Adjusted EBITDA, Adjusted for Potential Divestitures 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 normal operating performance. Additionally, the Company’s
calculation of Adjusted EBITDA, Adjusted EBITDA, Adjusted for
Divestitures and Adjusted EBITDA, Adjusted for Potential
Divestitures may not be comparable to similarly titled measures
reported by other companies.
FOOTNOTES TO UNAUDITED FINANCIAL
STATEMENTS AND SELECTED OPERATING DATA
(Continued)
The following table reconciles Adjusted EBITDA, Adjusted
EBITDA, Adjusted for Divestitures and Adjusted EBITDA, Adjusted for
Potential Divestitures, 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 and combined
financial statements for the respective periods (in thousands):
Three Months Ended December 31,
Year Ended December 31, 2017
2016 2017 2016 Net income
(loss) $ (26,023 ) $ (90,092 ) $ (112,357 ) $ (345,197 ) Interest
expense, net 31,873 28,684 122,077 113,440 Provision for (benefit
from) income taxes (21,779 ) (3,555 ) (21,865 ) (53,875 )
Depreciation and amortization 18,714 26,434
82,155 117,288 EBITDA 2,785
(38,529 ) 70,010 (168,344 ) Legal, professional and settlement
costs (518 ) 1,166 6,001 7,342 Impairment of long-lived assets and
goodwill 25,820 41,470 47,281 291,870 Loss (gain) on sale of
hospitals, net (131 ) 2,150 (5,243 ) 2,150 Transaction costs
related to the Spin-off 49 44 253 5,488 Post-spin headcount
reductions — 1,617 2,543 1,617 Change in estimate related to
collectability of patient accounts receivable (l) 21,000
22,799 21,000 22,799
Adjusted EBITDA 49,005 30,717 141,845 162,922 Negative
EBITDA of divested hospitals 5,144 13,140
20,637 33,107 Adjusted EBITDA,
Adjusted for Divestitures 54,149 43,857 162,482 196,029 Negative
(Positive) EBITDA of potential divestitures 3,114
2,102 8,337 (8,232 ) Adjusted
EBITDA, Adjusted for Potential Divestitures $ 57,263 $
45,959 $ 170,819 $ 187,797 (d) 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 December 31, Year Ended December 31,
2017 2016 2017
2016 (per share - basic and diluted) (per share -
basic and diluted) Earnings (loss) per share
attributable to Quorum Health Corporation stockholders, as reported
$ (0.95 ) $ (3.19 ) $ (4.06 ) $ (12.24 ) Adjustments: Legal,
professional and settlement costs (0.01 ) 0.04 0.18 0.22 Impairment
of long-lived assets and goodwill 0.50 1.40 1.41 8.89 Loss (gain)
on sale of hospitals, net — 0.07 (0.16 ) 0.07 Transaction costs
related to the Spin-off — — 0.01 0.17 Post-spin headcount
reductions — 0.05 0.08 0.05 Change in estimate related to
collectability of patient accounts receivable 0.40 0.77 0.63 0.69
Net operating losses of divested hospitals 0.10
0.44 0.61 1.01 Earnings
(loss) per share attributable to Quorum Health Corporation
stockholders, excluding adjustments $ 0.04 $ (0.42 ) $ (1.30
) $ (1.14 )
FOOTNOTES TO UNAUDITED FINANCIAL
STATEMENTS AND SELECTED OPERATING DATA
(Continued)
(e) For comparative purposes, the Company used
28,412,054 shares as the number of weighted-average shares to
calculate basic and diluted earnings per share for periods prior to
the Spin-off. This number represents the number of shares issued on
the Spin-off date. Due to the net loss attributable to Quorum
Health Corporation in the three months and year ended December 31,
2017, no incremental shares are included in diluted earnings per
share for these periods because the effect of the incremental
shares would be anti-dilutive. No incremental shares were
considered for any periods prior to the Spin-off. (f)
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. (g) Admissions
represent the number of patients admitted for inpatient services.
(h) Adjusted admissions are computed by multiplying
admissions by gross patient revenues and then dividing that number
by gross inpatient revenues. (i) Emergency room visits
represent the number of patients registered and treated in the
Company’s emergency rooms. (j) 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. (k) Same-facility financial
and operating data excludes hospitals that were sold 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 Sandhills Regional Medical Center, Barrow Regional
Medical Center, Cherokee Medical Center, Trinity Hospital of
Augusta, Lock Haven Hospital, Sunbury Community Hospital and L.V.
Stabler Memorial Hospital, which were sold on December 1, 2016,
December 31, 2016, March 31, 2017, June 30, 2017, September 30,
2017, September 30, 2017 and October 31, 2017, respectively.
(l) As of December 31, 2017, the Company recorded a change in
estimate of $21.0 million to reduce the net realizable value of its
patient accounts receivable. During the fourth quarter of 2017, the
Company analyzed its self-pay patient accounts receivable at a more
comprehensive and disaggregated level and refined its estimate of
the collectability of the portion of self-pay accounts receivable
related to insured patients, primarily co-pays and deductibles. The
Company’s analysis also included an evaluation of patient accounts
receivable retained in the divestitures of six of the Company’s
seven divested hospitals. This adjustment negatively impacted the
provision for bad debts in the net operating revenues component of
the statements of income for both the three months and year ended
December 31, 2017. As of December 31, 2016, the Company
recorded a change in estimate of $22.8 million to reduce the net
realizable value of its patient accounts receivable. This
adjustment negatively impacted both contractual allowances and the
provision for bad debts in the net operating revenues component of
the statements of income for both the three months and year ended
December 31, 2016. The portion of this change in estimate that
impacted contractual allowances was $11.4 million and related to
increasing delays associated with collections on Illinois Medicaid
accounts receivable. The remainder of the change in estimate, also
$11.4 million, impacted the provision for bad debts and related to
an assessment of the collectability of managed care and commercial
accounts receivable aged greater than one year based on a review of
historical cash collections for these accounts.
Forward-Looking Statements
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,” 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 the Company
operates;
- risks associated with the Company’s
substantial indebtedness, leverage and debt service obligations,
including its ability to comply with its debt covenants, including
its senior credit facility, as amended;
- the Company’s ability to successfully
make acquisitions or complete divestitures and the timing thereof,
its ability to complete any such acquisitions or divestitures on
desired terms or at all, and its ability to realize the intended
benefits from any such acquisitions or 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
the Company operates;
- the extent to which regulatory and
economic changes occur in Illinois, where a material portion of the
Company’s 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 impact of certain outsourcing
functions, and the ability of CHS, as provider of the Company’s
billing and collection services pursuant to the transition services
agreements, to timely and appropriately bill and collect;
- the Company’s ability to manage
effectively its arrangements with third-party vendors for key
non-clinical business functions and services;
- the ability to achieve operating and
financial targets and to control the costs of providing services if
patient volumes are lower than expected;
- the effects related to outbreaks of
infectious diseases;
- the Company’s ability to attract and
retain, at reasonable employment costs, qualified personnel, key
management, physicians, nurses and other healthcare workers;
- 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;
- the impact of seasonal or severe
weather conditions or earthquakes;
- the Company’s ongoing ability to
demonstrate meaningful use of certified EHR technology and
recognize income for the related Medicare or Medicaid incentive
payments, to the extent such payments have not expired;
- 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;
- the Company’s 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 and creditor
litigations against the Company and certain of its officers 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 the Company, including self-insured malpractice
claims;
- the impact of cyber-attacks or security
breaches;
- the Company’s ability to utilize its
income tax loss carryforwards and risks associated with the Tax
Cuts and Jobs Act of 2017;
- the Company’s ability to maintain
certain accreditations at its existing facilities and any future
facilities it may acquire;
- 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 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 acquisitions, replacement facilities or other capital
expenditures;
- the Company’s 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 the Company believes that these forward-looking
statements are based on 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 its control.
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.
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.
The Company undertakes 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: http://www.businesswire.com/news/home/20180315006430/en/
Quorum Health CorporationMichael J. Culotta,
615-221-3502Executive Vice President and Chief Financial
Officer
Quorum Health (NYSE:QHC)
Historical Stock Chart
From Aug 2024 to Sep 2024
Quorum Health (NYSE:QHC)
Historical Stock Chart
From Sep 2023 to Sep 2024