Full year net loss attributable to Quorum
Health Corporation was ($200.2) million, or ($6.91) per
share
Full year Adjusted EBITDA was $126.4 million
and Adjusted EBITDA, Adjusted for Divestitures was $150.6
million
2019 same-facility net operating revenues
guidance of $1.825 to $1.875 billion and Adjusted EBITDA, Adjusted
for Divestitures guidance of $160 to $180 million
Quorum Health Corporation (NYSE: QHC) (the “Company”) today
announced financial and operating results for the fourth quarter
and year ended December 31, 2018.
QUORUM HEALTH CORPORATION Unaudited Financial
Highlights
(In Millions)
Three Months EndedDecember
31,
Year EndedDecember 31,
2018 2017 2018 2017 Net
operating revenues $ 458.6 $
515.1
(1)
$ 1,878.6 $ 2,072.2
Net loss attributable to Quorum Health
Corporation
$
(20.7
)
$
(26.8
)
$
(200.2
)
$
(114.2
) Cash flows from operating activities
$
(3.4
) $ 66.2 $ 39.5 $ 67.0 Same-facility net operating revenues $ 460.7
$
482.8
(1)
$ 1,857.5 $ 1,819.4 Adjusted EBITDA(2) $ 37.5 $
49.0
(1)
$ 126.4 $ 141.8 Adjusted EBITDA, Adjusted for Divestitures(2) $
40.5 $
63.9
(1)
$ 150.6 $ 177.2
(1) Includes $22.5 million of revenues and
$16.5 million of EBITDA from the California Hospital Quality
Assurance Fee (“HQAF”) program for the first three quarters of
2017.
(2) A table providing supplemental
information on Adjusted EBITDA; Adjusted EBITDA, Adjusted for
Divestitures and reconciling net loss to Adjusted EBITDA and
Adjusted EBITDA, Adjusted for Divestitures is included in this
release.
Robert Fish, Quorum Health’s President and Chief Executive
Officer, commented, “Our fourth quarter results represent a strong
finish to 2018, and I am proud of the progress our team has made on
the strategic initiatives that we established earlier in the year.
Over the course of 2018, we significantly improved our EBITDA
margins through targeted efficiency initiatives, and divested three
hospitals, which brought us closer to our refinancing goal. In
addition, we have strengthened our management team by adding
experienced leadership in many key areas of our business. In early
January, we also received a final ruling in our arbitration with
CHS, which is a major step toward a collaborative exit of the
remaining Transition Services Agreements. I look forward to
building on the success we had in 2018 and carrying that momentum
forward through 2019.”
Financial results for the fourth quarter and full year ended
December 31, 2018 reflect the following:
- Compared to the fourth quarter of 2017,
same-facility net patient revenues decreased 1.6% and same-facility
net patient revenue per adjusted admission increased 0.9%, when
normalized for $22.5 million in out-of-period California HQAF
program revenues recognized in the fourth quarter of 2017 and a
$14.7 million change in estimate to the net realizable value of
patient accounts receivable during the fourth quarter of 2017. The
decrease in same-facility net patient revenues relative to the
fourth quarter of 2017 was primarily driven by lower volumes, which
reflects the Company’s initiatives to eliminate certain
unprofitable service lines, underperforming physicians and
unfavorable managed care contracts. The impact of lower volumes on
net patient revenue was partially offset by increased patient
acuity and improved payor mix.
- Fourth quarter Adjusted EBITDA was 8.2%
of net operating revenues and Adjusted EBITDA, Adjusted for
Divestitures was 8.8% of same-facility net operating revenues,
which reflect the benefit of the Company’s margin improvement
initiatives that were implemented in the second quarter of
2018.
- Full year cash flows from operating
activities included $12.3 million in cash costs from the closure of
one hospital, $12.5 million of cash costs related to headcount
reductions and $5.2 million of cash costs related to the
arbitration with CHS.
Fourth Quarter and Full Year 2018
Operating Highlights
QUORUM HEALTH CORPORATION Unaudited Operating
Highlights (Percent Change compared to the prior period in
2017)
Three Months EndedDecember 31,
2018
Year EndedDecember 31,
2018
Consolidated
Same-Facility
Consolidated
Same-Facility
Admissions(1) (15.6 )% (4.4 )% (16.1 )% (2.9 )% Adjusted
Admissions(1) (14.1 )% (2.5 )% (15.5 )% (1.4 )% Surgeries(1) (24.8
)% (8.0 )% (25.1 )% (4.1 )% Emergency Room Visits(1) (17.4 )% (4.9
)% (16.2 )% (1.1 )% Net patient revenue per adjusted admission 4.8
% (0.8 )% 7.6 % 4.4 %
(1) Definitions of Admissions, Adjusted
Admissions, Surgeries and Emergency Room Visits are included in
this release.
- Operating results for the fourth
quarter and full year 2018 reflect the impact of the Company’s
initiatives to eliminate certain unprofitable service lines,
underperforming physicians and unfavorable managed care contracts.
These initiatives were implemented in the second quarter of
2018.
- Same-facility admissions for the fourth
quarter reflect a decline in flu related volumes, which reduced
same-facility admissions by 1.1% compared to the fourth quarter of
2017.
Balance Sheet and
Liquidity
- As of December 31, 2018 the Company had
cash and cash equivalents of $3.2 million and total debt of $1.2
billion, including $790.8 million outstanding under its Term Loan
Facility and $14 million outstanding under its ABL Credit Facility.
Under its current credit agreement, the Company’s Net Secured
Leverage Ratio was 4.38x, implying a cushion of 12% of EBITDA.
Divestiture Update
- The Company has a stated strategy of
reducing its debt and is currently in the process of divesting
certain hospital assets. Since the spin-off, the Company has sold
10 hospitals and paid down $84.8 million in debt on its Term Loan
Facility. The Company currently has a signed definitive purchase
agreement to sell Scenic Mountain Medical Center in Big Spring,
Texas, which is expected to close by the end of April 2019. The
Company has also targeted certain other hospitals and groups of
hospitals for sale by the end of 2019.
Financial Outlook
The Company has established the following financial guidance for
2019:
(In Millions) 2018 Actual
2019 GuidanceRange
Same-facility net operating revenues $1,857.5 $1,825 - $1,875
Adjusted EBITDA, Adjusted for Divestitures $150.6 $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 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 December 31, 2018, the Company
owned or leased 27 hospitals in rural and mid-sized markets located
across 14 states and licensed for 2,604 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
Wednesday, March 13, 2019, at 11:00 a.m. Eastern, to review its
financial and operating results for the fourth quarter and year
ended December 31, 2018. 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 5227969 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 December 31, 2018
2017 % of %
of Amount Revenues Amount Revenues
Operating revenues (a) $ 596,648 Provision for bad debts (b)
81,566 Net operating revenues $ 458,630 100.0
% 515,082 100.0 % Operating costs and expenses:
Salaries and benefits 224,069 48.9 % 253,106 49.1 % Supplies 53,014
11.6 % 63,932 12.4 % Other operating expenses (a) 134,123 29.1 %
156,669 30.5 % Depreciation and amortization 15,979 3.5 % 18,714
3.6 % Rent 11,478 2.5 % 13,599 2.6 % Electronic health records
incentives earned (372 ) (0.1 )% (229 ) — % Legal, professional and
settlement costs 1,625 0.4 % (518 ) (0.1 )% Impairment of
long-lived assets and goodwill 4,940 1.1 % 25,820 5.0 % Loss (gain)
on sale of hospitals, net 78 — % (131 ) — % Loss on closure of
hospitals, net 478 0.1 % — — % Transaction costs related to the
Spin-off — — % 49 — % Total operating
costs and expenses 445,412 97.1 % 531,011
103.1 % Income (loss) from operations 13,218 2.9 % (15,929 )
(3.1 )% Interest expense, net 32,823 7.2 %
31,873 6.2 % Income (loss) before income taxes (19,605 )
(4.3 )% (47,802 ) (9.3 )% Provision for (benefit from) income taxes
315 — % (21,779 ) (4.2 )% Net income (loss)
(c) (19,920 ) (4.3 )% (26,023 ) (5.1 )% Less: Net income (loss)
attributable to noncontrolling interests 814 0.2 %
785 0.1 % Net income (loss) attributable to Quorum
Health Corporation $ (20,734 ) (4.5 )% $ (26,808 ) (5.2 )%
Earnings (loss) per share attributable to Quorum Health Corporation
stockholders: Basic and diluted (d) $ (0.71 ) $ (0.95 )
Weighted-average shares outstanding: Basic and diluted
29,227,634 28,248,527
QUORUM
HEALTH CORPORATION UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (LOSS) (In Thousands, Except Earnings
per Share and Shares) Year Ended
December 31, 2018 2017
% of % of Amount
Revenues Amount Revenues Operating
revenues (a) $ 2,327,655 Provision for bad debts (b) 255,485
Net operating revenues $ 1,878,589 100.0 %
2,072,170 100.0 % Operating costs and expenses: Salaries and
benefits 929,937 49.5 % 1,034,797 49.9 % Supplies 213,746 11.4 %
250,523 12.1 % Other operating expenses (a) 575,033 30.7 % 623,063
30.1 % Depreciation and amortization 67,994 3.6 % 82,155 4.0 % Rent
47,029 2.5 % 50,230 2.4 % Electronic health records incentives
earned (989 ) (0.1 )% (4,745 ) (0.2 )% Legal, professional and
settlement costs 11,974 0.6 % 6,001 0.3 % Impairment of long-lived
assets and goodwill 77,138 4.1 % 47,281 2.3 % Loss (gain) on sale
of hospitals, net 9,005 0.5 % (5,243 ) (0.3 )% Loss on closure of
hospitals, net 18,673 1.0 % — — % Transaction costs related to the
Spin-off — — % 253 — % Total operating
costs and expenses 1,949,540 103.8 % 2,084,315
100.6 % Income (loss) from operations (70,951 ) (3.8 )%
(12,145 ) (0.6 )% Interest expense, net 128,130 6.8 %
122,077 5.9 % Income (loss) before income taxes
(199,081 ) (10.6 )% (134,222 ) (6.5 )% Provision for (benefit from)
income taxes (847 ) — % (21,865 ) (1.1 )% Net income
(loss) (c) (198,234 ) (10.6 )% (112,357 ) (5.4 )%
Less: Net income (loss) attributable to
noncontrolling interests
2,014 0.1 % 1,833 0.1 % Net income
(loss) attributable to Quorum Health Corporation $ (200,248 ) (10.7
)% $ (114,190 ) (5.5 )% Earnings (loss) per share
attributable to Quorum Health Corporation stockholders: Basic and
diluted (d) $ (6.91 ) $ (4.06 ) Weighted-average shares
outstanding: Basic and diluted 28,976,122
28,113,566
QUORUM HEALTH CORPORATION
UNAUDITED CONSOLIDATED SELECTED OPERATING DATA
Three Months Ended December 31, 2018
2017 $ Variance
% Variance Consolidated and combined: Number
of licensed beds at end of period (e) 2,604 2,979 (375 ) (12.6 )%
Admissions (f) 17,676 20,932 (3,256 ) (15.6 )% Adjusted admissions
(g) 43,640 50,788 (7,148 ) (14.1 )% Surgeries (h) 17,881 23,793
(5,912 ) (24.8 )% Emergency room visits (i) 128,628 155,746 (27,118
) (17.4 )% Medicare case mix (j) 1.47 1.45 0.02 1.4 %
Same-facility: (k) Number of licensed beds at end of period (e)
2,604 2,630 (26 ) (1.0 )% Admissions (f) 17,676 18,483 (807 ) (4.4
)% Adjusted admissions (g) 43,640 44,742 (1,102 ) (2.5 )% Surgeries
(h) 17,881 19,445 (1,564 ) (8.0 )% Emergency room visits (i)
128,628 135,267 (6,639 ) (4.9 )% Medicare case mix (j) 1.47 1.42
0.05 3.5 %
Year Ended
December 31, 2018 2017
$ Variance % Variance
Consolidated and combined: Number of licensed beds at end of period
(e) 2,604 2,979 (375 ) (12.6 )% Admissions (f) 74,222 88,504
(14,282 ) (16.1 )% Adjusted admissions (g) 183,919 217,583 (33,664
) (15.5 )% Surgeries (h) 75,509 100,863 (25,354 ) (25.1 )%
Emergency room visits (i) 553,045 660,246 (107,201 ) (16.2 )%
Medicare case mix (j) 1.44 1.43 0.01 0.7 % Same-facility:
(k) Number of licensed beds at end of period (e) 2,604 2,630 (26 )
(1.0 )% Admissions (f) 72,457 74,625 (2,168 ) (2.9 )% Adjusted
admissions (g) 178,859 181,328 (2,469 ) (1.4 )% Surgeries (h)
72,631 75,763 (3,132 ) (4.1 )% Emergency room visits (i) 535,718
541,455 (5,737 ) (1.1 )% Medicare case mix (j) 1.44 1.41 0.03 2.1 %
QUORUM HEALTH CORPORATION UNAUDITED
CONSOLIDATED SELECTED OPERATING DATA
Three Months Ended December 31, 2018
2017 $ Variance
% Variance Consolidated and combined: Net
patient revenues $ 441,627 $ 490,471 $ (48,844 ) (10.0 )%
Non-patient revenues 17,003 24,611 (7,608 )
(30.9 )% Total net operating revenues $ 458,630 $ 515,082 $ (56,452
) (11.0 )% Net patient revenues per adjusted admission $ 10,120 $
9,657 $ 463 4.8 % Net operating revenues per adjusted
admission $ 10,509 $ 10,142 $ 367 3.6 %
Same-facility: Net patient revenues $ 443,710 $ 458,503 $ (14,793 )
(3.2 )% Non-patient revenues 16,999 24,281
(7,282 ) (30.0 )% Total net operating revenues $ 460,709 $ 482,784
$ (22,075 ) (4.6 )% Net patient revenues per adjusted admission $
10,168 $ 10,248 $ (80 ) (0.8 )% Net operating revenues per adjusted
admission $ 10,557 $ 10,790 $ (233 ) (2.2 )%
Year Ended December 31, 2018
2017 $ Variance %
Variance Consolidated and combined: Net patient revenues
$ 1,796,215 $ 1,974,847 $ (178,632 ) (9.0 )% Non-patient revenues
82,374 97,323 (14,949 ) (15.4 )% Total net
operating revenues $ 1,878,589 $ 2,072,170 $ (193,581 ) (9.3 )% Net
patient revenues per adjusted admission $ 9,766 $ 9,076 $ 690
7.6 % Net operating revenues per adjusted admission $ 10,214
$ 9,524 $ 690 7.2 % Same-facility: Net patient
revenues $ 1,775,617 $ 1,723,967 $ 51,650 3.0 % Non-patient
revenues 81,883 95,397 (13,514 ) (14.2 )%
Total net operating revenues $ 1,857,500 $ 1,819,364 $ 38,136
2.1 % Net patient revenues per adjusted admission $ 9,927 $
9,507 $ 420 4.4 % Net operating revenues per adjusted
admission $ 10,385 $ 10,034 $ 351 3.5 %
QUORUM HEALTH CORPORATION UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS (In Thousands, Except Par Value
per Share and Shares) December 31,
2018 2017 ASSETS Current
assets: Cash and cash equivalents $ 3,203 $ 5,617 Patient accounts
receivable, net of allowance for doubtful accounts of $352,509 at
December 31, 2017 322,608 343,145 Inventories 45,646 53,459 Prepaid
expenses 19,683 21,167 Due from third-party payors 63,443 97,202
Current assets of hospitals held for sale
—
8,112 Other current assets 36,405 47,440
Total current assets 490,988 576,142
Property and equipment, at cost 1,287,329 1,405,184 Less:
Accumulated depreciation and amortization (727,891 )
(729,905 ) Total property and equipment, net 559,438 675,279
Goodwill 401,073 409,229 Intangible assets, net 48,289 64,850
Long-term assets of hospitals held for sale
—
7,734 Other long-term assets 74,306 95,607
Total assets $ 1,574,094 $ 1,828,841
LIABILITIES AND EQUITY Current liabilities: Current
maturities of long-term debt $ 1,697 $ 1,855 Accounts payable
143,917 171,250 Accrued liabilities: Accrued salaries and benefits
76,908 77,803 Accrued interest 10,024 10,466 Due to third-party
payors 45,852 47,705 Current liabilities of hospitals held for sale
—
2,577 Other current liabilities 43,336 43,687
Total current liabilities 321,734 355,343 Long-term debt
1,191,777 1,212,035 Deferred income tax liabilities, net 6,736
7,774 Other long-term liabilities 126,499
137,954 Total liabilities 1,646,746
1,713,106 Redeemable noncontrolling interests 2,278
2,325 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; 31,521,398 shares issued and outstanding at December
31, 2018 and 30,294,895 shares issued and outstanding at December
31, 2017 3 3 Additional paid-in capital 557,309 549,610 Accumulated
other comprehensive income (loss) 759 (1,956 ) Accumulated deficit
(648,464 ) (448,216 ) Total Quorum Health Corporation
stockholders' equity (deficit) (90,393 ) 99,441 Nonredeemable
noncontrolling interests 15,463 13,969
Total equity (deficit) (74,930 ) 113,410 Total
liabilities and equity $ 1,574,094 $ 1,828,841
QUORUM HEALTH CORPORATION UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands)
Year Ended December 31,
2018 2017 2016
Cash flows from operating activities: Net income (loss) $
(198,234 ) $ (112,357 ) $ (345,197 ) Adjustments to reconcile net
income (loss) to net cash provided by (used in) operating
activities: Depreciation and amortization 67,994 82,155 117,288
Non-cash interest expense 8,733 5,770 2,496 Provision for (benefit
from) deferred income taxes (1,280 ) (22,137 ) (56,339 )
Stock-based compensation expense 10,663 9,952 7,441 Impairment of
long-lived assets and goodwill 77,138 47,281 291,870 Loss (gain) on
sale of hospitals, net 9,005 (5,243 ) 2,150 Non-cash portion of
loss on hospital closures 6,394 — — Changes in reserves for
self-insurance claims, net of payments 19,678 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 959
190 (575 ) Changes in operating assets and liabilities, net of
acquisitions and divestitures: Patient accounts receivable, net
25,977 29,091 10,205 Due from and due to third-party payors, net
31,906 24,201 7,005 Inventories, prepaid expenses and other current
assets 15,156 673 1,457 Accounts payable and accrued liabilities
(33,860 ) (14,743 ) 20,760 Long-term assets and liabilities, net
(725 ) 3,269 (9,120 ) Net cash provided
by (used in) operating activities 39,504
66,970 81,086 Cash flows from investing
activities: Capital expenditures for property and equipment (45,882
) (61,530 ) (79,920 ) Capital expenditures for software (2,662 )
(6,898 ) (7,269 ) Acquisitions, net of cash acquired (121 ) (1,920
) (785 ) Proceeds from the sale of hospitals 40,848 32,081 13,746
Other investing activities (489 ) —
1,082 Net cash provided by (used in) investing activities
(8,306 ) (38,267 ) (73,146 ) Cash flows
from financing activities: Borrowings under revolving credit
facilities 490,000 508,000 50,000 Repayments under revolving credit
facilities (476,000 ) (508,000 ) (50,000 ) Borrowings of long-term
debt 105 376 1,256,281 Repayments of long-term debt (41,918 )
(39,195 ) (15,222 ) Increase in Due to Parent, net — — 24,796
Payments of debt issuance costs (2,268 ) (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 (1,996 ) (1,508 ) (13 ) Cash
distributions to noncontrolling investors (1,535 ) (3,851 ) (2,850
) Purchases of shares from noncontrolling investors —
(1,244 ) (101 ) Net cash provided by (used in)
financing activities (33,612 ) (48,541 )
16,409 Net change in cash and cash equivalents (2,414
) (19,838 ) 24,349 Cash and cash equivalents at beginning of period
5,617 25,455 1,106 Cash
and cash equivalents at end of period $ 3,203 $ 5,617
$ 25,455
FOOTNOTES TO UNAUDITED FINANCIAL STATEMENTS
AND SELECTED OPERATING DATA
(a) The California Department of Health Care
Services administers 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 the HQAF program, the
Company recognized $7.9 million of net operating revenues less $2.1
million of provider taxes for the three months ended December 31,
2018. The Company recognized the full year 2017 HQAF of $29.9
million of net operating revenues and $7.9 million of provider
taxes for the three months ended December 31, 2017, when CMS
approved Phase V of the program. For the year ended December 31,
2018, the Company recognized $32.4 million of net operating
revenues less $6.5 million of provider taxes compared to $29.9
million of net operating revenues and $7.9 million of provider
taxes for the year ended December 31, 2017.
(b) On January 1, 2018, the Company adopted ASC
Topic 606 “Revenue from Contracts with Customers” using the
modified retrospective method to all contracts existing on January
1, 2018. Results for reporting periods beginning after January 1,
2018 are presented under Topic 606, while prior period amounts are
not adjusted and continue to be reported in accordance with the
Company’s historic accounting under Topic 605. Prior to the
adoption of ASC Topic 606, a significant portion of the Company’s
allowance for doubtful accounts related to amounts due from
self-pay patients, as well as co-pays and deductibles owed to the
Company by patients with insurance. Under ASC 606, the estimated
allowance for these patients are generally considered a direct
reduction to net operating revenues rather than as a provision for
bad debts.
(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, net loss on closure of hospitals, transition of
transition services agreements (“TSAs”), transaction costs related
to the Spin-off, post-spin headcount reductions and executive
severance, and changes in estimate related to 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 adjusted to exclude the
effect of EBITDA of hospitals either sold or closed as of December
31, 2018. The Company has presented Adjusted EBITDA and Adjusted
EBITDA, Adjusted for 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 and Adjusted EBITDA, Adjusted
for 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 and Adjusted EBITDA, Adjusted
for 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 the Company’s normal operating performance.
Additionally, the Company’s calculation of Adjusted EBITDA and
Adjusted EBITDA, Adjusted for Divestitures may not be comparable to
similarly titled measures reported by other companies.
The following table reconciles Adjusted EBITDA
and Adjusted EBITDA, Adjusted for 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 statements of income for the respective periods (in
thousands):
Three Months Ended December 31,
Year Ended December 31, 2018
2017 2018 2017 Net
income (loss) $ (19,920 ) $ (26,023 ) $ (198,234 ) $ (112,357 )
Interest expense, net 32,823 31,873 128,130 122,077 Provision for
(benefit from) income taxes 315 (21,779 ) (847 ) (21,865 )
Depreciation and amortization 15,979 18,714
67,994 82,155 EBITDA 29,197
2,785 (2,957 ) 70,010 Legal, professional and settlement costs
1,625 (518 ) 11,974 6,001 Impairment of long-lived assets and
goodwill 4,940 25,820 77,138 47,281 Loss (gain) on sale of
hospitals, net 78 (131 ) 9,005 (5,243 )
Loss on closure of hospitals, net
478 — 18,673 — Transition of transition services agreements (475 )
— 3,207 — Transaction costs related to the Spin-off — 49 — 253
Post-spin headcount reductions and executive severance 1,667 —
9,355 2,543 Change in estimate related to collectability of patient
accounts receivable (l) — 21,000
— 21,000 Adjusted EBITDA 37,510 49,005 126,395
141,845 Negative EBITDA of divested hospitals 2,941
14,858 24,232 35,368
Adjusted EBITDA, Adjusted for Divestitures $ 40,451 $ 63,863
$ 150,627 $ 177,213
(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, 2018
2017 2018 2017 (per share -
basic and diluted) (per share - basic and diluted)
Earnings (loss) per share attributable to Quorum Health
Corporation stockholders, as reported $ (0.71 ) $ (0.95 ) $ (6.91 )
$ (4.06 ) Adjustments: Legal, professional and settlement costs
0.06 (0.01 ) 0.41 0.18 Impairment of long-lived assets and goodwill
0.17 0.50 2.65 1.41 Loss (gain) on sale of hospitals, net — (0.10 )
0.31 (0.16 ) Loss on closure of hospitals, net 0.02 — 0.64 —
Transition of transition services agreements (0.02 ) — 0.11 —
Transaction costs related to the Spin-off — — — 0.01 Post-spin
headcount reductions and executive severance 0.06 — 0.32 0.08
Change in estimate related to collectability of patient accounts
receivable — 0.40 — 0.63 Net operating losses of divested hospitals
0.10 0.29 0.83
1.05 Earnings (loss) per share attributable to Quorum Health
Corporation stockholders, excluding adjustments $ (0.32 ) $ 0.13
$ (1.64 ) $ (0.86 )
(e) 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.
(f) Admissions represent the number of patients admitted for
inpatient services.
(g) Adjusted admissions are computed by multiplying admissions
by gross patient revenues and then dividing that number by gross
inpatient revenues.
(h) Surgeries represent the number of inpatient and outpatient
surgeries.
(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 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 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 and McKenzie Regional Hospital 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
and September 30, 2018, 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;
- the impact of certain outsourcing
functions, and the ability of CHS, as provider of our billing and
collection services pursuant to the TSAs, 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 adopt, 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 and creditor
litigations against our company and certain of our officers and
directors 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/20190312005882/en/
Investor Contact:Asher DewhurstWestwicke
PartnersQuorumHealth@Westwicke.com(443) 213-0500
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