| [March 29, 2017] |
 |
Quorum Health Corporation Announces Fourth Quarter and Year End 2016 Operating Results and Issues 2017 Guidance
Quorum Health Corporation (NYSE: QHC) (the "Company") today announced
its operating and financial results for the three months and year ended
December 31, 2016.
Net operating revenues for the three months ended December 31, 2016
totaled $515.2 million, compared to $558.2 million for the same period
in 2015, a 7.7% decrease. Net operating revenues for the two hospitals
divested in December 2016 totaled $4.7 million and $12.7 million for the
three months ended December 31, 2016 and 2015, respectively. Net loss
attributable to Quorum Health Corporation for the three months ended
December 31, 2016 was $(90.7) million, or $(3.19) per share, compared to
$(0.6) million, or $(0.02) per share, for the same period in 2015. The
financial results for the three months ended December 31, 2016 were
significantly impacted by $41.5 million, or $1.40 per share, of
impairment charges to long-lived assets and goodwill and a $22.8
million, or $0.77 per share, reduction in net operating revenues as a
result of a change in estimate reducing the net realizable value of
patient accounts receivable at December 31, 2016, which negatively
impacted both contractual allowances and the provision for bad debts.
The Company's 2015 results for the same period were impacted by $13.0
million, or $0.37 per share, of impairment charges to long-lived assets
and no comparable change in estimate related to the collectability of
patient accounts receivable. For additional information on the 2016
charges mentioned above, see footnotes (j) and (k) to the Financial
Statements and Selected Operating Data below. The Company's
same-facility operating results for the three months ended December 31,
2016 reflect a 2.8% decrease in admissions and a 3.5% decrease in
adjusted admissions compared to the same period in 2015. On a
consolidated basis, admissions decreased 3.8% and adjusted admissions
decreased 4.6% during the three months ended December 31, 2016 compared
to the same period in 2015.
Adjusted EBITDA for the three months ended December 31, 2016 was $30.7
million, compared to $77.7 million for the same period in 2015. The
Company divested two hospitals in December 2016 and utilized the
combined proceeds of $13.7 million to pay down debt. These two hospitals
negatively impacted EBITDA by $9.1 million for the three months ended
December 31, 2016 and $1.1 million in the comparable 2015 period. As a
result, Adjusted EBITDA, Adjusted for Divestitures, was $39.8 million,
compared to $78.8 million for the same period in 2015. For information
regarding why the Company believes Adjusted EBITDA and Adjusted EBITDA,
Adjusted for Divestitures present useful information to investors and
for a reconciliation of Adjusted EBITDA and Adjusted EBITDA, Adjusted
for Divestitures to net income (loss) attributable to Quorum Health
Corporation, the most directly comparable U.S. GAAP financial measure,
see footnote (b) to the Financial Statements and Selected Operating Data
below.
Net operating revenues for the year ended December 31, 2016 totaled
$2,138.5 million, compared to $2,187.3 million for the year ended
December 31, 2015, a 2.2% decrease. Net operating revenues for the two
hospitals divested in 2016 totaled $43.6 million and $54.8 million for
the twelve months ended December 31, 2016 and 2015, respectively. Net
loss attributable to Quorum Health Corporation for the year ended
December 31, 2016 was $(347.7) million, or $(12.24) per share, compared
to net income attributable to Quorum Health Corporation of $1.3 million,
or $0.05 per share, for the year ended December 31, 2015. The financial
results for the year ended December 31, 2016 were significantly impacted
by $291.9 million, or $8.89 per share, of impairment charges to
long-lived assets and goodwill and $22.8 million, or $0.69 per share,
related to the change in estimate mentioned above. The Company's
same-facility operating results for the year ended December 31, 2016
reflect a 2.8% decrease in admissions and a 2.0% decrease in adjusted
admissions compared to the year ended December 31, 2015. On a
consolidated basis, admissions decreased 3.1% and adjusted admissions
decreased 2.3% during the year ended December 31, 2016 compared to the
year ended December 31, 2015.
Adjusted EBITDA for the year ended December 31, 2016 was $162.9 million,
compared to $263.7 million for the year ended December 31, 2015. The two
hospitals divested in December 2016 negatively impacted EBITDA by $18.9
million and $5.4 million during the year ended December 31, 2016 and
2015, respectively. As a result, Adjusted EBITDA, Adjusted for
Divestitures, was $181.9 million, compared to $269.0 million for the
year ended December 31, 2015.
Adjusted EBITDA, 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 on the sale of
hospitals, transaction costs related to the Company's spin-off from
Community Health Systems, Inc. (the "Spin-off"), severance costs for
post-spin headcount reductions and a change in estimate related to the
collectability of patient accounts receivable. Adjusted EBITDA, Adjusted
for Divestitures further excludes the effect of negative EBITDA of
hospitals divested. For information regarding why the Company believes
Adjusted EBITDA and Adjusted EBITDA, Adjusted for Divestitures present
useful information to investors and for a reconciliation of Adjusted
EBITDA and Adjusted EBITDA, Adjusted for Divestitures to net income
(loss) attributable to Quorum Health Corporation, the most directly
comparable U.S. GAAP financial measure, see footnote (b) to the
Financial Statements and Selected Operating Data below.
Commenting on the results, Thomas D. Miller, president and chief
executive officer of Quorum Health Corporation, said, "These results are
not what we hoped for; however, we have made significant progress
towards restructuring our hospital portfolio, refining our operations,
and adding access to care in our communities since our spin-off from
Community Health Systems, Inc. in April 2016.
"On the restructuring front, of the hospitals we initially targeted for
divestiture, we sold two in the fourth quarter of 2016. These two
hospitals represented almost $19 million of negative EBITDA during 2016.
We have executed a definitive agreement for the sale of one hospital
that we expect to close by the end of the first quarter of 2017, and we
expect to execute a definitive agreement on another hospital also before
the end of the first quarter of 2017. Further, we have signed letters of
intent covering four additional hospitals with expected divestiture
completions in the second and third quarters of 2017. We are also
evaluating potential divestitures of additional hospitals with negative
and low single digit EBITDA margins. We expect to complete the resulting
transactions from this group over the next twelve months, and we
estimate cash proceeds from these transactions to be approximately $200
million, all of which will be used to reduce our secured debt.
"On the operations front, we implemented substantial cost-reducing
initiatives in the first quarter of 2017 to better align our expenses to
our volumes. A special initiative to improve our collection cycle is
underway, beginning in Illinois, with respect to our business office
collections. As to increasing local access to care, our physician
recruitment team has made a major impact on meeting the medically
underserved needs in our markets so that we can take care of the
patients in our communities. We commenced 43 physician practices in the
fourth quarter of 2016 and added another 32 practices in the first
quarter of 2017. We continue to position our hospitals for additional
outpatient growth and to expand needed services. With these efforts, as
well as other earnings driving initiatives, we remain focused on
improving operations, reducing leverage and increasing access and the
quality of care we provide in our hospitals."
Financial Outlook
Set forth below is selected information concerning the Company's
financial outlook for the year ending December 31, 2017. 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
2017 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, 2017 to range from $2.050 billion to $2.100 billion. The Company
expects Adjusted EBITDA for the year ending December 31, 2017 to range
from $150 million to $170 million and Adjusted EBITDA, Adjusted for
Potential Divestitures to range from $170 million to $200 million. The
guidance gives effect to: (i) divestitures and potential divestitures
stated above, (ii) the approval of the California Department of Health
Care Services' Hospital Quality Fee ("HQAF") Program by The Centers for
Medicare & Medicaid Services ("CMS"), which we estimate to be approved
in the fourth quarter of 2017 at approximately $13 million less than
2016, (iii) the reduction in electronic health records incentives earned
in 2017 of approximately $7 million dollars from the 2016 amounts, (iv)
including approximately $10 million to $13 million of non-cash
stock-based compensation and other non-cash benefits expense and
approximately $25 million to $26 million of non-cash insurance expense,
and (v) no estimate for the effects of any changes to the Affordable
Care Act. Adjusted EBITDA, Adjusted for Potential Divestitures includes
the same assumptions above, in addition to excluding the negative EBITDA
of the potential divestitures from the beginning of the year. A
reconciliation of the Company's projected 2017 Adjusted EBITDA, and
Adjusted EBITDA, Adjusted for Potential Divestitures, each a
forward-looking non-GAAP financial measure, to net income (loss)
attributable to Quorum Health Corporation, 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 adjustments required for such reconciliation without
unreasonable effort, including interest expense, income tax expense
(benefit) and other adjustments that would be necessary to prepare a
forward-looking statement of net income (loss) attributable to Quorum
Health Corporation in accordance with U.S. GAAP. For the same reasons,
the Company is unable to address the probable significance of the
unavailable information.
Update on Form 10-K Filing Date and Announcement
of Date for 2017 Annual Meeting of Stockholders
The Company has filed today with the Securities and Exchange Commission
a notification on Form 12b-25 that the Company is not, without
unreasonable effort and expense, able to file its Annual Report on Form
10-K for the fiscal year ended December 31, 2016 within the prescribed
time period due to efforts by the Company to work with its lenders to
amend certain provisions of the Company's existing senior credit
facility (the "Credit Facility Amendment"). (The delay is not related to
the Company's previously announced investigation.) On December 31, 2016,
the Company adopted FASB Accounting Standards Update ("ASU") No.
2014-15, Presentation of Financial Statements-Going Concern,
which requires management to evaluate if there may be conditions or
events that raise substantial doubt about an entity's ability to
continue as a going concern. As a result of adopting ASU No. 2014-15,
management was required to evaluate the Company's ability to comply with
the Secured Net Leverage Ratio under its senior credit facility for one
year following the issuance of its financial statements for the year
ended December 31, 2016 ("2016 Financial Statements"). Although the
Company was in compliance with its financial covenants as of December
31, 2016, the new standard requires management to base its evaluation of
the Company's ability to continue to comply with those covenants on
results and events considered "probable" of occurring considering
historical results, implemented plans, and executed agreements as of the
date the Company issues its 2016 Financial Statements. Therefore, given
(i) the Company's historical operating results, (ii) delays in the
approval of the California Department of Health Care Services' HQAF
Program for the 2017 to 2019 program period as the Company cannot
recognize any earned revenues until CMS approval of the program has been
issued, and (iii) the amount of net operating losses from hospitals the
Company intends to divest, management plans to amend certain provisions
of its senior credit facility to provide greater confidence in the
Company's ability to comply with the Secured Net Leverage Ratio for the
one year period following the issuance of its 2016 Financial Statements.
See footnotes (a) and (l) to the Financial Statements and Selected
Operating Data below which provide additional information on the
California program and the Company's debt covenant compliance.
The Company is actively working with its lenders to finalize the Credit
Facility Amendment and believes that, if it is able to successfully
negotiate and consummate the Credit Facility Amendment by the time it
files its Annual Report on Form 10-K, the Company will be able to
conclude that management's plans alleviate any substantial doubt about
its ability to continue as a going concern. The Company intends to file
its Annual Report on Form 10-K within the grace period prescribed in
Rule 12b-25 under the Securities Exchange Act of 1934, as amended.
In light of the additional time needed to finalize the Company's Annual
Report on Form 10-K, the Company currently anticipates that its 2017
Annual Meeting of Stockholders ("Annual Meeting") will now be held on
Tuesday, May 16, 2017. Additional details related to the 2017 Annual
Meeting of Stockholders will be circulated in proxy materials in advance
of the Annual Meeting.
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, 2016, the Company owned or leased 36
hospitals in rural and mid-sized markets located across 16 states and
licensed for 3,459 beds. Through Quorum Health Resources LLC, a
wholly-owned subsidiary, the Company provides hospital management
advisory and healthcare consulting services. 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 to review
operating and financial results for the three months and year ended
December 31, 2016 upon completion of its year end audit and the filing
of its 2016 Annual Report on Form 10-K. The Company does not believe the
unaudited financial statements and operating data contained within this
press release will differ significantly from the audited financial
statements to be filed in its Annual Report on Form 10-K, though the
Company cautions that the financial information in this press release is
preliminary and based on information available at this time. The
Company's audited results are subject to change, and actual results may
differ significantly from these unaudited amounts. 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.
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QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF
INCOME (LOSS)
(In Thousands, Except Earnings Per Share and Shares)
|
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|
|
|
|
|
|
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|
|
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Three Months Ended December 31,
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2016
|
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|
|
2015
|
|
|
|
|
|
|
|
|
|
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% of
|
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|
|
|
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|
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% of
|
|
|
|
|
|
Amount
|
|
|
|
Revenues
|
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|
|
Amount
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues, net of contractual allowances and discounts (a)
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$
|
593,855
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|
|
|
|
|
|
|
|
$
|
624,864
|
|
|
|
|
|
|
|
Provision for bad debts
|
|
|
|
78,615
|
|
|
|
|
|
|
|
|
|
66,638
|
|
|
|
|
|
|
|
Net operating revenues
|
|
|
|
515,240
|
|
|
|
|
100.0
|
%
|
|
|
|
558,226
|
|
|
|
|
100.0
|
%
|
|
Operating costs and expenses:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
268,559
|
|
|
|
|
52.1
|
%
|
|
|
|
250,650
|
|
|
|
|
44.9
|
%
|
|
Supplies
|
|
|
|
66,829
|
|
|
|
|
13.0
|
%
|
|
|
|
60,300
|
|
|
|
|
10.8
|
%
|
|
Other operating expenses
|
|
|
|
163,276
|
|
|
|
|
31.8
|
%
|
|
|
|
161,996
|
|
|
|
|
29.1
|
%
|
|
Depreciation and amortization
|
|
|
|
26,434
|
|
|
|
|
5.1
|
%
|
|
|
|
32,674
|
|
|
|
|
5.9
|
%
|
|
Rent
|
|
|
|
11,966
|
|
|
|
|
2.3
|
%
|
|
|
|
11,889
|
|
|
|
|
2.1
|
%
|
|
Electronic health records incentives earned
|
|
|
|
(1,691
|
)
|
|
|
|
(0.3
|
)%
|
|
|
|
(4,327
|
)
|
|
|
|
(0.8
|
)%
|
|
Legal, professional and settlement costs
|
|
|
|
1,166
|
|
|
|
|
0.2
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%
|
|
|
|
-
|
|
|
|
|
-
|
%
|
|
Impairment of long-lived assets and goodwill (j)
|
|
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|
41,470
|
|
|
|
|
8.0
|
%
|
|
|
|
13,000
|
|
|
|
|
2.3
|
%
|
|
Loss on sale of hospitals, net
|
|
|
|
2,150
|
|
|
|
|
0.4
|
%
|
|
|
|
-
|
|
|
|
|
-
|
%
|
|
Transaction costs related to the Spin-off
|
|
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|
44
|
|
|
|
|
-
|
%
|
|
|
|
7,283
|
|
|
|
|
1.3
|
%
|
|
Total operating costs and expenses
|
|
|
|
580,203
|
|
|
|
|
112.6
|
%
|
|
|
|
533,465
|
|
|
|
|
95.6
|
%
|
|
Income (loss) from operations
|
|
|
|
(64,963
|
)
|
|
|
|
(12.6
|
)%
|
|
|
|
24,761
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|
|
|
|
4.4
|
%
|
|
Interest expense, net
|
|
|
|
28,684
|
|
|
|
|
5.6
|
%
|
|
|
|
24,111
|
|
|
|
|
4.3
|
%
|
|
Income (loss) before income taxes
|
|
|
|
(93,647
|
)
|
|
|
|
(18.2
|
)%
|
|
|
|
650
|
|
|
|
|
0.1
|
%
|
|
Provision for (benefit from) income taxes
|
|
|
|
(3,555
|
)
|
|
|
|
(0.7
|
)%
|
|
|
|
(131
|
)
|
|
|
|
-
|
%
|
|
Net income (loss)
|
|
|
|
(90,092
|
)
|
|
|
|
(17.5
|
)%
|
|
|
|
781
|
|
|
|
|
0.1
|
%
|
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
|
|
574
|
|
|
|
|
0.1
|
%
|
|
|
|
1,360
|
|
|
|
|
0.2
|
%
|
|
Net income (loss) attributable to Quorum Health Corporation (b)
|
|
|
$
|
(90,666
|
)
|
|
|
|
(17.6
|
)%
|
|
|
$
|
(579
|
)
|
|
|
|
(0.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share attributable to Quorum Health Corporation
stockholders:
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Basic and diluted (c)
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|
$
|
(3.19
|
)
|
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|
|
|
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
Weighted-average shares outstanding:
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Basic and diluted (d)
|
|
|
|
28,416,801
|
|
|
|
|
|
|
|
|
|
28,412,054
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For footnotes, see pages 9-13.
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|
|
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|
|
QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF
INCOME (LOSS)
(In Thousands, Except Earnings Per Share and Shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
Amount
|
|
|
|
Revenues
|
|
|
|
Amount
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues, net of contractual allowances and discounts (a)
|
|
|
$
|
2,419,053
|
|
|
|
|
|
|
|
|
$
|
2,445,858
|
|
|
|
|
|
|
Provision for bad debts
|
|
|
|
280,586
|
|
|
|
|
|
|
|
|
|
258,520
|
|
|
|
|
|
|
Net operating revenues
|
|
|
|
2,138,467
|
|
|
|
|
100.0
|
%
|
|
|
|
2,187,338
|
|
|
|
100.0
|
%
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
1,057,119
|
|
|
|
|
49.4
|
%
|
|
|
|
1,016,696
|
|
|
|
46.5
|
%
|
|
Supplies
|
|
|
|
258,639
|
|
|
|
|
12.1
|
%
|
|
|
|
249,792
|
|
|
|
11.4
|
%
|
|
Other operating expenses
|
|
|
|
645,802
|
|
|
|
|
30.3
|
%
|
|
|
|
634,233
|
|
|
|
29.0
|
%
|
|
Depreciation and amortization
|
|
|
|
117,288
|
|
|
|
|
5.5
|
%
|
|
|
|
128,001
|
|
|
|
5.9
|
%
|
|
Rent
|
|
|
|
49,883
|
|
|
|
|
2.3
|
%
|
|
|
|
48,729
|
|
|
|
2.2
|
%
|
|
Electronic health records incentives earned
|
|
|
|
(11,482
|
)
|
|
|
|
(0.5
|
)%
|
|
|
|
(25,779
|
)
|
|
|
(1.2
|
)%
|
|
Legal, professional and settlement costs
|
|
|
|
7,342
|
|
|
|
|
0.3
|
%
|
|
|
|
-
|
|
|
|
-
|
%
|
|
Impairment of long-lived assets and goodwill (j)
|
|
|
|
291,870
|
|
|
|
|
13.6
|
%
|
|
|
|
13,000
|
|
|
|
0.6
|
%
|
|
Loss on sale of hospitals, net
|
|
|
|
2,150
|
|
|
|
|
0.1
|
%
|
|
|
|
-
|
|
|
|
-
|
%
|
|
Transaction costs related to the Spin-off
|
|
|
|
5,488
|
|
|
|
|
0.3
|
%
|
|
|
|
16,337
|
|
|
|
0.7
|
%
|
|
Total operating costs and expenses
|
|
|
|
2,424,099
|
|
|
|
|
113.4
|
%
|
|
|
|
2,081,009
|
|
|
|
95.1
|
%
|
|
Income (loss) from operations
|
|
|
|
(285,632
|
)
|
|
|
|
(13.4
|
)%
|
|
|
|
106,329
|
|
|
|
4.9
|
%
|
|
Interest expense, net
|
|
|
|
113,440
|
|
|
|
|
5.3
|
%
|
|
|
|
98,290
|
|
|
|
4.5
|
%
|
|
Income (loss) before income taxes
|
|
|
|
(399,072
|
)
|
|
|
|
(18.7
|
)%
|
|
|
|
8,039
|
|
|
|
0.4
|
%
|
|
Provision for (benefit from) income taxes
|
|
|
|
(53,875
|
)
|
|
|
|
(2.6
|
)%
|
|
|
|
3,304
|
|
|
|
0.2
|
%
|
|
Net income (loss)
|
|
|
|
(345,197
|
)
|
|
|
|
(16.1
|
)%
|
|
|
|
4,735
|
|
|
|
0.2
|
%
|
|
Less: Net income (loss) attributable to noncontrolling interests
|
|
|
|
2,491
|
|
|
|
|
0.2
|
%
|
|
|
|
3,398
|
|
|
|
0.1
|
%
|
|
Net income (loss) attributable to Quorum Health Corporation (b)
|
|
|
$
|
(347,688
|
)
|
|
|
|
(16.3
|
)%
|
|
|
$
|
1,337
|
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share attributable to Quorum Health Corporation
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted (c)
|
|
|
$
|
(12.24
|
)
|
|
|
|
|
|
|
|
$
|
0.05
|
|
|
|
|
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted (d)
|
|
|
|
28,413,247
|
|
|
|
|
|
|
|
|
|
28,412,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For footnotes, see pages 9-13.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QUORUM HEALTH CORPORATION
UNAUDITED CONSOLIDATED AND COMBINED SELECTED OPERATING DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
$ Variance
|
|
|
|
% Variance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated and combined:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of licensed beds at end of period (e)
|
|
|
|
3,459
|
|
|
|
|
3,582
|
|
|
|
|
(123
|
)
|
|
|
|
(3.4
|
)%
|
|
Admissions (f)
|
|
|
|
23,200
|
|
|
|
|
24,107
|
|
|
|
|
(907
|
)
|
|
|
|
(3.8
|
)%
|
|
Adjusted admissions (g)
|
|
|
|
57,202
|
|
|
|
|
59,935
|
|
|
|
|
(2,733
|
)
|
|
|
|
(4.6
|
)%
|
|
Emergency room visits (h)
|
|
|
|
174,754
|
|
|
|
|
179,977
|
|
|
|
|
(5,223
|
)
|
|
|
|
(2.9
|
)%
|
|
Medicare case mix (i)
|
|
|
|
1.41
|
|
|
|
|
1.33
|
|
|
|
|
0.08
|
|
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-facility:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of licensed beds at end of period (e)
|
|
|
|
3,459
|
|
|
|
|
3,462
|
|
|
|
|
(3
|
)
|
|
|
|
(0.1
|
)%
|
|
Admissions (f)
|
|
|
|
23,004
|
|
|
|
|
23,661
|
|
|
|
|
(657
|
)
|
|
|
|
(2.8
|
)%
|
|
Adjusted admissions (g)
|
|
|
|
56,582
|
|
|
|
|
58,637
|
|
|
|
|
(2,055
|
)
|
|
|
|
(3.5
|
)%
|
|
Emergency room visits (h)
|
|
|
|
172,375
|
|
|
|
|
176,623
|
|
|
|
|
(4,248
|
)
|
|
|
|
(2.4
|
)%
|
|
Medicare case mix (i)
|
|
|
|
1.41
|
|
|
|
|
1.34
|
|
|
|
|
0.07
|
|
|
|
|
5.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
$ Variance
|
|
|
|
% Variance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated and combined:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of licensed beds at end of period (e)
|
|
|
|
3,459
|
|
|
|
|
3,582
|
|
|
|
|
(123
|
)
|
|
|
|
(3.4
|
)%
|
|
Admissions (f)
|
|
|
|
95,313
|
|
|
|
|
98,378
|
|
|
|
|
(3,065
|
)
|
|
|
|
(3.1
|
)%
|
|
Adjusted admissions (g)
|
|
|
|
235,263
|
|
|
|
|
240,841
|
|
|
|
|
(5,578
|
)
|
|
|
|
(2.3
|
)%
|
|
Emergency room visits (h)
|
|
|
|
726,155
|
|
|
|
|
730,021
|
|
|
|
|
(3,866
|
)
|
|
|
|
(0.5
|
)%
|
|
Medicare case mix (i)
|
|
|
|
1.38
|
|
|
|
|
1.34
|
|
|
|
|
0.04
|
|
|
|
|
3.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-facility:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of licensed beds at end of period (e)
|
|
|
|
3,459
|
|
|
|
|
3,462
|
|
|
|
|
(3
|
)
|
|
|
|
(0.1
|
)%
|
|
Admissions (f)
|
|
|
|
93,837
|
|
|
|
|
96,561
|
|
|
|
|
(2,724
|
)
|
|
|
|
(2.8
|
)%
|
|
Adjusted admissions (g)
|
|
|
|
231,046
|
|
|
|
|
235,693
|
|
|
|
|
(4,647
|
)
|
|
|
|
(2.0
|
)%
|
|
Emergency room visits (h)
|
|
|
|
713,151
|
|
|
|
|
716,303
|
|
|
|
|
(3,152
|
)
|
|
|
|
(0.4
|
)%
|
|
Medicare case mix (i)
|
|
|
|
1.39
|
|
|
|
|
1.35
|
|
|
|
|
0.04
|
|
|
|
|
3.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For footnotes, see pages 9-13.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS
(In Thousands, Except Par Value per Share and Shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
25,455
|
|
|
|
$
|
1,106
|
|
|
Patient accounts receivable, net of allowance for doubtful accounts
of $360,796 and $346,507 at December 31, 2016 and 2015, respectively
|
|
|
|
380,685
|
|
|
|
|
390,890
|
|
|
Inventories
|
|
|
|
58,124
|
|
|
|
|
60,542
|
|
|
Prepaid expenses
|
|
|
|
23,028
|
|
|
|
|
16,030
|
|
|
Due from third-party payors
|
|
|
|
116,235
|
|
|
|
|
110,806
|
|
|
Current assets of hospitals held for sale
|
|
|
|
1,502
|
|
|
|
|
-
|
|
|
Other current assets
|
|
|
|
57,942
|
|
|
|
|
59,011
|
|
|
Total current assets
|
|
|
|
662,971
|
|
|
|
|
638,385
|
|
|
Property and equipment, at cost
|
|
|
|
1,519,975
|
|
|
|
|
1,603,653
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
|
(786,075
|
)
|
|
|
|
(723,404
|
)
|
|
Total property and equipment, net
|
|
|
|
733,900
|
|
|
|
|
880,249
|
|
|
Goodwill
|
|
|
|
416,833
|
|
|
|
|
541,704
|
|
|
Intangible assets, net
|
|
|
|
84,982
|
|
|
|
|
129,250
|
|
|
Long-term assets of hospitals held for sale
|
|
|
|
6,851
|
|
|
|
|
-
|
|
|
Other long-term assets
|
|
|
|
88,833
|
|
|
|
|
105,268
|
|
|
Total assets
|
|
|
$
|
1,994,370
|
|
|
|
$
|
2,294,856
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
|
$
|
5,683
|
|
|
|
$
|
7,915
|
|
|
Accounts payable
|
|
|
|
169,684
|
|
|
|
|
138,483
|
|
|
Accrued liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accrued salaries and benefits
|
|
|
|
98,803
|
|
|
|
|
82,620
|
|
|
Accrued interest
|
|
|
|
19,915
|
|
|
|
|
-
|
|
|
Due to third-party payors
|
|
|
|
42,537
|
|
|
|
|
30,103
|
|
|
Current liabilities of hospitals held for sale
|
|
|
|
492
|
|
|
|
|
-
|
|
|
Other current liabilities
|
|
|
|
53,268
|
|
|
|
|
45,255
|
|
|
Total current liabilities
|
|
|
|
390,382
|
|
|
|
|
304,376
|
|
|
Long-term debt (l)
|
|
|
|
1,241,142
|
|
|
|
|
15,500
|
|
|
Due to Parent, net
|
|
|
|
-
|
|
|
|
|
1,800,908
|
|
|
Deferred income tax liabilities, net
|
|
|
|
31,474
|
|
|
|
|
41,030
|
|
|
Other long-term liabilities
|
|
|
|
108,996
|
|
|
|
|
108,141
|
|
|
Total liabilities
|
|
|
|
1,771,994
|
|
|
|
|
2,269,955
|
|
|
Redeemable noncontrolling interests
|
|
|
|
6,807
|
|
|
|
|
8,958
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
Quorum Health Corporation stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value per share, 100,000,000 shares
authorized, none issued at December 31, 2016
|
|
|
|
-
|
|
|
|
|
-
|
|
|
Common stock, $0.0001 par value per share, 300,000,000 shares
authorized; 29,482,050 shares issued and outstanding at December 31,
2016
|
|
|
|
3
|
|
|
|
|
-
|
|
|
Additional paid-in capital
|
|
|
|
537,911
|
|
|
|
|
-
|
|
|
Accumulated other comprehensive loss
|
|
|
|
(2,760
|
)
|
|
|
|
-
|
|
|
Accumulated deficit
|
|
|
|
(334,026
|
)
|
|
|
|
-
|
|
|
Total Quorum Health Corporation stockholders' equity
|
|
|
|
201,128
|
|
|
|
|
-
|
|
|
Parent's equity
|
|
|
|
-
|
|
|
|
|
3,184
|
|
|
Nonredeemable noncontrolling interests
|
|
|
|
14,441
|
|
|
|
|
12,759
|
|
|
Total equity
|
|
|
|
215,569
|
|
|
|
|
15,943
|
|
|
Total liabilities and equity
|
|
|
$
|
1,994,370
|
|
|
|
$
|
2,294,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For footnotes, see pages 9-13.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QUORUM HEALTH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF
CASH FLOWS
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(345,197
|
)
|
|
$
|
4,735
|
|
|
$
|
7,353
|
|
|
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
117,288
|
|
|
|
128,001
|
|
|
|
127,593
|
|
|
Non-cash interest expense
|
|
|
2,496
|
|
|
|
-
|
|
|
|
-
|
|
|
Provision for (benefit from) deferred income taxes
|
|
|
(56,339
|
)
|
|
|
2,542
|
|
|
|
5,007
|
|
|
Stock-based compensation expense
|
|
|
7,441
|
|
|
|
-
|
|
|
|
-
|
|
|
Impairment of long-lived assets and goodwill
|
|
|
291,870
|
|
|
|
13,000
|
|
|
|
1,000
|
|
|
Loss on sale of hospitals, net
|
|
|
2,150
|
|
|
|
-
|
|
|
|
-
|
|
|
Changes in reserves for self-insurance claims, net of payments
|
|
|
27,994
|
|
|
|
-
|
|
|
|
-
|
|
|
Changes in reserves for legal, professional and settlement costs,
net of payments
|
|
|
3,651
|
|
|
|
-
|
|
|
|
-
|
|
|
Other non-cash expense (income), net
|
|
|
(575
|
)
|
|
|
380
|
|
|
|
495
|
|
|
Changes in operating assets and liabilities, net of acquisitions and
divestitures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient accounts receivable, net
|
|
|
10,205
|
|
|
|
(16,639
|
)
|
|
|
(38,744
|
)
|
|
Due from and due to third-party payors, net
|
|
|
7,005
|
|
|
|
(18,198
|
)
|
|
|
(47,626
|
)
|
|
Inventories, prepaid expenses and other current assets
|
|
|
1,457
|
|
|
|
8,000
|
|
|
|
(7,194
|
)
|
|
Accounts payable and accrued liabilities
|
|
|
20,760
|
|
|
|
(78,944
|
)
|
|
|
3,422
|
|
|
Long-term assets and liabilities, net
|
|
|
(9,120
|
)
|
|
|
12
|
|
|
|
(8,262
|
)
|
|
Net cash provided by operating activities
|
|
|
81,086
|
|
|
|
42,889
|
|
|
|
43,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures for property and equipment
|
|
|
(79,920
|
)
|
|
|
(59,455
|
)
|
|
|
(69,066
|
)
|
|
Capital expenditures for software
|
|
|
(7,269
|
)
|
|
|
(8,845
|
)
|
|
|
(61,054
|
)
|
|
Acquisitions, net of cash acquired
|
|
|
(785
|
)
|
|
|
(8,019
|
)
|
|
|
(141,994
|
)
|
|
Proceeds from the sale of hospitals
|
|
|
13,746
|
|
|
|
-
|
|
|
|
-
|
|
|
Proceeds from asset sales
|
|
|
1,082
|
|
|
|
3,114
|
|
|
|
258
|
|
|
Other investing activities
|
|
|
-
|
|
|
|
(5,387
|
)
|
|
|
(242
|
)
|
|
Net cash used in investing activities
|
|
|
(73,146
|
)
|
|
|
(78,592
|
)
|
|
|
(272,098
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings of long-term debt
|
|
|
1,256,281
|
|
|
|
372
|
|
|
|
110
|
|
|
Repayments of long-term debt
|
|
|
(15,222
|
)
|
|
|
(1,563
|
)
|
|
|
(1,631
|
)
|
|
Increase in Due to Parent, net
|
|
|
24,796
|
|
|
|
262,775
|
|
|
|
111,686
|
|
|
Increase (decrease) in receivables facility, net
|
|
|
-
|
|
|
|
(224,774
|
)
|
|
|
122,064
|
|
|
Payments of debt issuance costs
|
|
|
(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
|
|
|
(13
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Cash distributions to noncontrolling investors
|
|
|
(2,850
|
)
|
|
|
(1,623
|
)
|
|
|
(1,489
|
)
|
|
Purchases of shares from noncontrolling investors
|
|
|
(101
|
)
|
|
|
(937
|
)
|
|
|
-
|
|
|
Net cash provided by financing activities
|
|
|
16,409
|
|
|
|
34,250
|
|
|
|
230,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
24,349
|
|
|
|
(1,453
|
)
|
|
|
1,686
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
1,106
|
|
|
|
2,559
|
|
|
|
873
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
25,455
|
|
|
$
|
1,106
|
|
|
$
|
2,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For footnotes, see pages 9-13.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 the most recent phase of the program,
covering the period January 2014 through December 2016, the Company
recognized $34.4 million, $31.5 million and $25.2 million of
operating revenues, net of fees, for the years ended December 31,
2016, 2015 and 2014, respectively.
|
|
|
|
|
|
|
|
|
|
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, the current program expired on December 31, 2016 and CMS
has not approved a new program. Consistent with the first four
phases of the HQAF program, the Company does not recognize any
revenues under the new program until CMS completes the approval
process. HQAF funding levels are based in part on Medi-Cal
utilization. As a result, changes in coverage of individuals under
the Medi-Cal program could affect the revenues and cash flows
related to the Company's California hospitals under future phases of
the HQAF program. Accordingly, the Company is unable to predict the
ultimate amount of revenues and cash flows its California hospitals
may receive from or the timing of CMS' approval of the extended HQAF
program, including its impact on the Company's 2017 quarterly or
full year net operating results.
|
|
|
|
|
|
|
(b)
|
|
|
EBITDA is a non-GAAP financial measure that consists of net income
(loss) attributable to Quorum Health Corporation before interest,
income taxes, depreciation and amortization and after adding back
net income (loss) attributable to noncontrolling interests. 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 on sale of
hospitals, transaction costs related to the Spin-off, severance
costs for post-spin headcount reductions and the change 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
consolidated 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 negative EBITDA of hospitals divested. 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 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.
|
|
|
|
|
|
FOOTNOTES TO UNAUDITED FINANCIAL STATEMENTS AND SELECTED OPERATING
DATA (CONTINUED)
The following table reconciles Adjusted EBITDA and Adjusted EBITDA,
Adjusted for Divestitures, each as defined above, to net income (loss)
attributable to Quorum Health Corporation, 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,
|
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Quorum Health Corporation
|
|
|
$
|
(90,666
|
)
|
|
|
$
|
(579
|
)
|
|
|
$
|
(347,688
|
)
|
|
|
$
|
1,337
|
|
Net income (loss) attributable to noncontrolling interests
|
|
|
|
574
|
|
|
|
|
1,360
|
|
|
|
|
2,491
|
|
|
|
|
3,398
|
|
Interest expense, net
|
|
|
|
28,684
|
|
|
|
|
24,111
|
|
|
|
|
113,440
|
|
|
|
|
98,290
|
|
Provision for (benefit from) income taxes
|
|
|
|
(3,555
|
)
|
|
|
|
(131
|
)
|
|
|
|
(53,875
|
)
|
|
|
|
3,304
|
|
Depreciation and amortization
|
|
|
|
26,434
|
|
|
|
|
32,674
|
|
|
|
|
117,288
|
|
|
|
|
128,001
|
|
EBITDA
|
|
|
|
(38,529
|
)
|
|
|
|
57,435
|
|
|
|
|
(168,344
|
)
|
|
|
|
234,330
|
|
Legal, professional and settlement costs
|
|
|
|
1,166
|
|
|
|
|
-
|
|
|
|
|
7,342
|
|
|
|
|
-
|
|
Impairment of long-lived assets and goodwill
|
|
|
|
41,470
|
|
|
|
|
13,000
|
|
|
|
|
291,870
|
|
|
|
|
13,000
|
|
Loss on sale of hospitals, net
|
|
|
|
2,150
|
|
|
|
|
-
|
|
|
|
|
2,150
|
|
|
|
|
-
|
|
Transaction costs related to the Spin-off
|
|
|
|
44
|
|
|
|
|
7,283
|
|
|
|
|
5,488
|
|
|
|
|
16,337
|
|
Severance costs for post-spin headcount reductions
|
|
|
|
1,617
|
|
|
|
|
-
|
|
|
|
|
1,617
|
|
|
|
|
-
|
|
Change in estimate related to collectability of patient accounts
receivable (k)
|
|
|
|
22,799
|
|
|
|
|
-
|
|
|
|
|
22,799
|
|
|
|
|
-
|
|
Adjusted EBITDA
|
|
|
|
30,717
|
|
|
|
|
77,718
|
|
|
|
|
162,922
|
|
|
|
|
263,667
|
|
Negative EBITDA of divested hospitals
|
|
|
|
9,110
|
|
|
|
|
1,125
|
|
|
|
|
18,930
|
|
|
|
|
5,357
|
|
Adjusted EBITDA, Adjusted for Divestitures
|
|
|
$
|
39,827
|
|
|
|
$
|
78,843
|
|
|
|
$
|
181,852
|
|
|
|
$
|
269,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In connection with the Credit Facility Amendment, the Company intends to
provide to lenders the following table which reconciles the major
components impacting Adjusted EBITDA, Adjusted for Divestitures for the
three months and year ended December 31, 2015 to the same 2016 periods
(in thousands):
|
|
|
|
Three Months Ended
|
|
|
|
Year Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 Adjusted EBITDA, Adjusted for Divestitures
|
|
|
$
|
78,843
|
|
|
|
$
|
269,024
|
|
|
Differences in hospitals to be divested
|
|
|
|
(7,223
|
)
|
|
|
|
(15,077
|
)
|
|
Differences in corporate office and management fees
|
|
|
|
(8,935
|
)
|
|
|
|
(15,847
|
)
|
|
Increase in medical specialist fees
|
|
|
|
(6,867
|
)
|
|
|
|
(21,761
|
)
|
|
TSA costs above previous allocations
|
|
|
|
(671
|
)
|
|
|
|
(6,275
|
)
|
|
Decline in EHR incentives
|
|
|
|
(2,636
|
)
|
|
|
|
(14,297
|
)
|
|
Reduction in rebates and administrative fees
|
|
|
|
(2,728
|
)
|
|
|
|
(5,273
|
)
|
|
Estimated volume impacts of hospitals not to be divested
|
|
|
|
(16,376
|
)
|
|
|
|
(24,435
|
)
|
|
Estimated rate impacts of hospitals not to be divested
|
|
|
|
8,973
|
|
|
|
|
31,064
|
|
|
Other
|
|
|
|
(2,553
|
)
|
|
|
|
(15,271
|
)
|
|
2016 Adjusted EBITDA, Adjusted for Divestitures
|
|
|
$
|
39,827
|
|
|
|
$
|
181,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOOTNOTES TO UNAUDITED FINANCIAL STATEMENTS AND SELECTED OPERATING
DATA (CONTINUED)
|
|
|
|
|
|
(c)
|
|
|
The following tables reconcile net income (loss) attributable to
Quorum Health Corporation, as reported, on a per share basis, with
the adjustments described herein:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
|
(per share - basic and diluted)
|
|
|
|
(per share - basic and diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share attributable to Quorum Health Corporation
stockholders, as reported
|
|
|
$
|
(3.19
|
)
|
|
|
$
|
(0.02
|
)
|
|
|
$
|
(12.24
|
)
|
|
|
$
|
0.05
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal, professional and settlement costs
|
|
|
|
0.04
|
|
|
|
|
-
|
|
|
|
|
0.22
|
|
|
|
|
-
|
|
Impairment of long-lived assets and goodwill
|
|
|
|
1.40
|
|
|
|
|
0.37
|
|
|
|
|
8.89
|
|
|
|
|
0.27
|
|
Loss on sale of hospitals, net
|
|
|
|
0.07
|
|
|
|
|
-
|
|
|
|
|
0.07
|
|
|
|
|
-
|
|
Transaction costs related to the Spin-off
|
|
|
|
-
|
|
|
|
|
0.20
|
|
|
|
|
0.17
|
|
|
|
|
0.34
|
|
Severance costs for post-spin headcount reductions
|
|
|
|
0.05
|
|
|
|
|
-
|
|
|
|
|
0.05
|
|
|
|
|
-
|
|
Change in estimate related to collectability of patient accounts
receivable
|
|
|
|
0.77
|
|
|
|
|
-
|
|
|
|
|
0.69
|
|
|
|
|
-
|
|
Net operating losses of divested hospitals
|
|
|
|
0.33
|
|
|
|
|
0.05
|
|
|
|
|
0.65
|
|
|
|
|
0.17
|
|
Earnings (loss) per share attributable to Quorum Health Corporation
stockholders, excluding adjustments
|
|
|
$
|
(0.53
|
)
|
|
|
$
|
0.60
|
|
|
|
$
|
(1.50
|
)
|
|
|
$
|
0.83
|
|
|
|
|
|
|
(d)
|
|
|
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, 2016, no incremental shares are
included in diluted earnings per share for these periods, because
the effect of the shares would be anti-dilutive. No incremental
shares were considered for any periods prior to the Spin-off.
|
|
|
|
|
|
|
(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 is computed by multiplying admissions by gross
patient revenues and then dividing that number by gross inpatient
revenues.
|
|
|
|
|
|
|
(h)
|
|
|
Emergency room visits represent the number of patients registered
and treated in the Company's emergency rooms.
|
|
|
|
|
|
|
(i)
|
|
|
Medicare case mix index is a relative value assigned to a
diagnosis-related group of inpatients 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.
|
|
|
|
|
|
FOOTNOTES TO UNAUDITED FINANCIAL STATEMENTS AND SELECTED OPERATING
DATA (CONTINUED)
|
|
|
|
|
|
(j)
|
|
|
A summary of the impairment charges recorded during the year ended
December 31, 2016 subsequent to the Spin-off follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Impairment Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
Property
|
|
|
|
Capitalized
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
and
|
|
|
|
Software
|
|
|
|
Medicare
|
|
|
|
Long-lived
|
|
|
|
|
|
|
|
and Long-
|
|
|
|
|
Equipment
|
|
|
|
Costs
|
|
|
|
Licenses
|
|
|
|
Assets
|
|
|
|
Goodwill
|
|
|
|
lived Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second quarter of 2016 impairment charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held for sale assets
|
|
|
$
|
9,789
|
|
|
|
$
|
4,411
|
|
|
|
$
|
-
|
|
|
|
$
|
14,200
|
|
|
|
$
|
5,000
|
|
|
|
$
|
19,200
|
|
Held for use assets
|
|
|
|
31,200
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
31,200
|
|
|
|
|
-
|
|
|
|
|
31,200
|
|
Preliminary step two goodwill impairment estimate
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
200,000
|
|
|
|
|
200,000
|
|
Total impairment charges recorded in the second quarter of 2016
|
|
|
|
40,989
|
|
|
|
|
4,411
|
|
|
|
|
-
|
|
|
|
|
45,400
|
|
|
|
|
205,000
|
|
|
|
|
250,400
|
|
Fourth quarter of 2016 impairment charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final step two goodwill impairment and asset analysis as of
September 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held for sale assets
|
|
|
|
1,386
|
|
|
|
|
14
|
|
|
|
|
-
|
|
|
|
|
1,400
|
|
|
|
|
-
|
|
|
|
|
1,400
|
|
Held for use assets
|
|
|
|
70,470
|
|
|
|
|
10,830
|
|
|
|
|
-
|
|
|
|
|
81,300
|
|
|
|
|
(80,000
|
)
|
|
|
|
1,300
|
|
Further decline in held for use assets as of December 31, 2016
|
|
|
|
32,723
|
|
|
|
|
3,677
|
|
|
|
|
2,370
|
|
|
|
|
38,770
|
|
|
|
|
-
|
|
|
|
|
38,770
|
|
Total impairment charges recorded in the fourth quarter of 2016
|
|
|
|
104,579
|
|
|
|
|
14,521
|
|
|
|
|
2,370
|
|
|
|
|
121,470
|
|
|
|
|
(80,000
|
)
|
|
|
|
41,470
|
|
Total impairment charges recorded in the full year 2016
|
|
|
$
|
145,568
|
|
|
|
$
|
18,932
|
|
|
|
$
|
2,370
|
|
|
|
$
|
166,870
|
|
|
|
$
|
125,000
|
|
|
|
$
|
291,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of management 's decision to classify certain
hospitals as held for sale and evaluate other hospitals for
divestiture, and due to the increase in net operating losses
associated with these hospitals, the Company analyzed the
long-lived assets of all of its hospitals to test for impairment
during the second quarter of 2016. The Company additionally
evaluated the estimated fair value of the hospitals held for sale
in relation to the overall fair value of its hospital operations
reporting unit to test for goodwill impairment and identified
certain indicators of goodwill impairment related to its entire
hospital operations reporting unit during the second quarter of
2016. Step one of the goodwill impairment evaluation indicated
that the carrying value of the hospital operations reporting unit
exceeded its fair value as of June 30, 2016. In step two of the
goodwill impairment test, a hypothetical purchase price valuation
for each hospital was performed utilizing a September 30, 2016
measurement date. The results of this analysis, which was
completed in the fourth quarter of 2016, indicated that the
carrying values of certain of the Company's individual hospitals
exceeded their fair values. Considering these results to be an
indicator of potential impairment as of September 30, 2016, the
Company tested the long-lived assets at certain of its hospitals
utilizing the September 30, 2016 measurement date. Furthermore, a
decline in operating results during the fourth quarter of 2016 led
the Company to update its impairment analysis utilizing a December
31, 2016 measurement date.
|
|
|
|
|
|
|
(k)
|
|
|
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 components of the statement 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.
|
|
|
|
|
|
FOOTNOTES TO UNAUDITED FINANCIAL STATEMENTS AND SELECTED OPERATING
DATA (CONTINUED)
|
|
|
|
|
|
(l)
|
|
|
As of December 31, 2016, the Company had a Secured Net Leverage
Ratio of 3.93 to 1.00, implying additional borrowing capacity of
$125.8 million. The maximum Secured Net Leverage Ratio permitted
under the Company's senior credit facility, as determined based on
12 month trailing Consolidated EBITDA defined in the credit
agreement (prior to any amendment) follows:
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
|
|
Secured Net
|
|
Period
|
|
|
Leverage Ratio
|
|
|
|
|
|
|
Period from April 29, 2016 to June 30, 2017
|
|
|
4.50 to 1.00
|
|
Period from July 1, 2017 to June 30, 2018
|
|
|
4.25 to 1.00
|
|
Period from July 1, 2018 and thereafter
|
|
|
4.00 to 1.00
|
|
|
|
|
|
Other Supplemental Information
The Company is in preliminary discussions related to the transition of
certain of its transition services agreements relating to billing and
collections and eligibility screening services, though no assurances can
be given related to the timing of such an agreement or that an agreement
will in fact occur.
The following table presents information related to the hospitals
intended for divestiture, including the estimated cash flow benefits
upon divestiture (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2016
|
|
|
|
FY 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Two hospitals divested in 2016
|
|
|
$
|
(9,110
|
)
|
|
|
$
|
(18,930
|
)
|
|
Hospitals to be divested
|
|
|
|
(4,623
|
)
|
|
|
|
(14,104
|
)
|
|
Total Negative Adjusted EBITDA
|
|
|
$
|
(13,733
|
)
|
|
|
$
|
(33,034
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Negative Adjusted EBITDA
|
|
|
|
|
|
|
|
$
|
33,034
|
|
|
Estimated capital expenditures reduction
|
|
|
|
|
|
|
|
|
5,371
|
|
|
Cash Flow Benefits Post Divestitures
|
|
|
|
|
|
|
|
$
|
38,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents information related to the Company 's days
sales outstanding as of December 31, 2016:
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
Hospital Non-Self Pay (excluding Illinois Medicaid > 180 days)
|
|
|
|
47.1
|
|
Hospital Illinois Medicaid > 180 Days
|
|
|
|
1.9
|
|
Hospital Self Pay
|
|
|
|
5.3
|
|
Clinics and Other Entities
|
|
|
|
3.9
|
|
Subtotal
|
|
|
|
58.2
|
|
|
|
|
|
|
|
Accounts Receivable at CHS Owned Collection Agency
|
|
|
|
9.8
|
|
Total Company Days Sales Outstanding
|
|
|
|
68.0
|
|
|
|
|
|
|
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 the Company's ability to
comply with its debt covenants;
-
risks that the Company may not be able to satisfactorily enter into a
Credit Facility Amendment, that additional resources and time may be
needed to complete and file the Annual Report on Form 10-K, and that
the Company may still conclude there is substantial doubt about its
ability to continue as a going concern even if a Credit Facility
Amendment is successfully negotiated and consummated;
-
the ability to achieve the anticipated benefits of the Spin-off;
-
the impact of the 2016 federal elections, which may lead to the repeal
of or significant changes to the Affordable Care Act provisions, their
implementation or their interpretation, as well as changes in other
federal, state or local laws or regulations affecting the healthcare
industry;
-
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 extent of which regulatory and economic changes occur in Illinois,
where a material portion of the Company's revenues are concentrated;
-
the success and long-term viability of the healthcare insurance
exchanges, which may be impacted by whether a sufficient number of
payors participate, as well as the impact of the 2016 federal
elections on the laws pursuant to the Affordable Care Act;
-
demographic changes;
-
the failure to comply with governmental regulations;
-
the impact of certain outsourcing functions, and the ability of
Community Health Systems, Inc., as provider of billing and collection
services to the Company pursuant to the transition services
agreements, to timely and appropriately bill and collect;
-
the potential adverse impact of known and unknown government
investigations, internal investigations, investor demands for
investigation, audits, and federal and state false claims act
litigation and other legal proceedings, including the recent
shareholder litigation 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;
-
the ability, where appropriate, to enter into, maintain and comply
with provider arrangements with payors and the terms of these
arrangements, which may be further impacted by the increasing
consolidation of health insurers and managed care companies;
-
changes in reimbursement rates paid by federal or state healthcare
programs, including Medicare and Medicaid, or commercial payors, and
the timeliness of reimbursement payments;
-
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 effects related to the continued implementation of the
sequestration spending reductions and the potential for future deficit
reduction legislation;
-
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 in states that have not
expanded Medicaid and difficulties in collecting payments for which
patients are responsible, including co-pays and deductibles;
-
the efforts of healthcare insurers, providers 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 Company's ongoing ability to demonstrate meaningful use of
certified electronic health records technology and recognize income
for the related Medicare or Medicaid incentive payments, to the extent
such payments have not expired;
-
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;
-
liabilities and other claims asserted against the Company, including
self-insured malpractice claims;
-
competition;
-
the ability to attract and retain, at reasonable employment costs,
qualified personnel, key management, physicians, nurses and other
healthcare workers;
-
changes in medical or other technology;
-
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 additional acquisitions
or replacement facilities or other capital expenditures;
-
the ability to successfully make acquisitions or complete divestitures
and the timing thereof, the ability to complete any such acquisitions
or divestitures on desired terms or at all, and the ability to realize
the intended benefits from any such acquisitions or divestitures;
-
the impact of seasonal or severe weather conditions or earthquakes;
-
the ability to obtain adequate levels of professional, general
liability and workers' compensation insurance;
-
the effects related to outbreaks of infectious diseases;
-
the impact of external, criminal cyber-attacks or security breaches;
-
the ability to manage effectively arrangements with third-party
vendors for key non-clinical business functions and services;
-
the ability to maintain certain accreditations at existing facilities
and any future facilities the Company may acquire; and
-
the risk factors included in the Company's Information Statement
attached as an exhibit to the Registration Statement on Form 10, as
amended, initially filed with the Securities and Exchange Commission
(the "SEC") on September 4, 2015 and declared effective on April 4,
2016, and other filings with the SEC.
Although the Company believes 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 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/20170329005438/en/
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