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anticipated sale of this operation to a time-healthcare systems, is a 22-state networkby the Health Care and Education Recon-line outside of CHI’s control. CHI remainsof more than 9,000 physicians and otherciliation Act of 2010 (Affordable Care Act orcommitted to selling or otherwise disposingadvanced practiced clinicians and 63,000ACA). In addition, slumping Medicare mar-of the QualChoice Health commercial oper-employees. The organization was formed ingins put hospitals on precarious cliff. In theations while it continues to actively market1996 when two congregations of the SistersNovember 27, 2017, Modern Healthcare, inthese operations.of Mercy joined their 10 hospitals togetheran Article entitled “Slumping Medicare mar-At the 36th Annual J.P. Morgan Health-to form Catholic Healthcare West, whichgins put hospitals on precarious cliff”, Vir-care Conference, CHI made a presentationnow includes over 400 care centers includ-gil Dickson indicated that “[w]hile extendedwherein it described a proposed mergering hospitals, urgent and occupational care,coverage in a net positive, hospital leaderswith Dignity Health. A non-binding letterimaging centers, home health, and primarystill complain that the government paymentof intent was signed on October 24, 2016,care clinics under the name Dignity Care,programs do not cover costs. In regard toand a Definitive Agreement was signed inheadquartered in San Francisco. AccordingMedicare, hospitals received 88 cents forDecember 2017, to create a new, nonprofitto the November 15, 2017, Deloitte Indepen-every dollar spent caring for beneficiarieshealth system. The combination would bringdent Auditor’s Review Report to the Boardin 2015 and 90 cents for Medicaid patients,together two leading health systems withof Directors of Dignity Health and its Sub-according to the American Hospital Asso-facilities in 28 states. The new health sys-ordinate Corporations as of the fiscal yearciation.” According to this Modern Health-tem will include more than 700 care sitesended June 30, 2017, excess of revenuescare article , Medicare margins are in a freeand 139 hospitals, offering people and com-over expenses attributable to Dignity Healthfall. In 2015, aggregate margins hit a negativemunities access to quality care delivered bytotaled an excess of 384 million compared7.1% across hospitals. According to the Medi-approximately 159,000 employees and moreto a deficit of revenues over expenses ofcare Payment Advisory Commission, mar-than 25,000 physicians and other advanced 238 million as of the fiscal year ended Junegins are expected to sink to a negative 10%practiced clinicians. The governing board30, 2016.this year. According to the American Hospi-of the new organization-Board of Stew-Why are General Acute Care Hospitalstal Association (AHA), hospitals and healthardship Trustees-will include six membersExperiencing Financial Challenge? Thesystems in the U.S. are facing an unparal-from each legacy board and the two CEOs tohealthcare industry in general, and theleled force to change. Industry experts haveestablish its corporate headquarters in Chi-acute care hospital business in particu-projected that multiple, intersecting pres-cago and operate under a new name that willlar, are experiencing significant regulatorysures will drive the transformation of health-be chosen in the second half of 2018. Localuncertainty based, in large part, on legisla-care delivery and financing from volume-facilities will continue operating under theirtive efforts to significantly modify or repealto-value payments over the next decade. Incurrent names.and potentially replace the Patient Protec-the current regulatory and economic envi-tion and Affordable Care Act, as amendedronment, hospitals must focus their effortsDignity Health, one of the nation’s largeston performative initiatives that are essentialin the short term and that will also remaincritical for long-term success. The inaugural report of the AHA Committee on Per-“The healthcare industry in general,and the acute care hospital business inparticular, are experiencing significantregulatory uncertainty based in largepart on legislative efforts to significantlymodifyor repeal and potentially replacethe Patient Protection and AffordableCare Act, as amended by the HealthCare and Education Reconciliation Actof 2010 (Affordable Care Act or ACA).”formance Improvement details “Hospitaland Care Systems of the Future”. The teamconducted exploratory interviews and analyzed the results to identify must-do, prioritystrategies and core organizational competencies that organizations should establishto remain successful in this time of sweeping change. One of these “Must-Do” strategies to succeed in the future was improvingefficiency through productivity and financialmanagement. These 10 “Must-Do Strategiesto Succeed in the Future” are available forreview on the AHA web site. At the U.S. News& World Report’s Healthcare of TomorrowConference which took place in Washington,

Hospital FinancesSource: MedPacD.C., on November 14-16, 2017, it was con-Privacy and security 569,471cash flow due in part to further swelling ofcluded that the healthcare of tomorrow willFraud and abuse 339,471staff and technology expenses” (Modernmove away from hospitals. At the J.P. Mor-Program integrity 337,379Healthcare, February 5, 2018) and based ongan Healthcare Conference which took placeNew models of care 121,774projections that operating cash flow willin January, it was reported that the direc-Total cost 7, 585,752contract by 2% to 4% over the next 12 to 18tion that hospitals are heading in is actu-Source: American Hospital Associationally pretty clear and consistent. One of the14months, that revenue growth will slow amid“very low” payment increases, that there willconsistent themes was that all hospitals areAccording to Navigant’s 2017 CEO Forum,be an ongoing shift in payment mix to gov-experiencing margin compression and that“Hospitals and health systems faced a tre-ernment payers, and there will be contin-hospitals must manage cost and margins.mendous uncertainty in 2017, a trend thatued shift to high-deductible health plans”.According to the American Hospital Asso-will continue throughout 2018. According(Hospital Financial Management Magazine,ciation, combined underpayments from theto Rulon F. Stacey, PhD., FACHE, ManagingFebruary 2018)government programs were 57.8 billion inDirector, Navigant Transformation Institute,Last year, a study by McKesson Corp.2015. This includes a shortfall of 41.6 bil-“I’ve seen firsthand how uncertainty canfound that only 26% of hospitals were meet-lion for Medicare and 16.2 billion for Med-affect delivery. Instead of waiting or waver-ing goals to lower healthcare costs under theicaid, the association reported. Attempts toing, providers must maintain their focus onnew pay models, and just 30% were meetingmove Medicare from a fee-for-service sys-efforts that improve safety, quality, satisfac-care-coordination goals. The slow progresstem to a value-based model poses perhapstion, eliminate disparity of care, and reduceis occurring despite significant implementa-the most serious challenge to hospitals andcost. But achieving these care delivery goalstion of cost incurred by hospitals. On aver-health systems struggling with low Medi-is increasingly proving a challenge. Accord-age, hospitals have five full-time employees,care programs.ing to a Navigant analysis of 2000 hospital,including clinical staff, tracking and report-from 2015-2017, average operating marginsing quality measures under value-basedRegulatory AreaTotal Costdropped from 5.6% to 3.6%, a 35% decrease.models, according to the American HospitalHospital condition of participation 3,108,052These trends are forecasted to continue, ifAssociation. They are also spending approx-Billing and coverage 1,641,046not worsen. Moody’s downgraded not-for-imately 709,000 annually on the admin-Meaningful use 759,689profit healthcare from stable to negative inistrative aspects of quality reporting. TheQuality reporting 708,6922018, predicting further decline in operatingAmerican Hospital Association estimatedMAR / APR 2018IHealthcare Journal of little rock

that health systems, hospitals and post-year beginning July 1, 2015, and ending JuneArkansas, a tertiary care referral center withacute providers spend 39 billion annually30, 2016, showed a negative 9,690,123, up522 acute care beds in use at June 30, 2017;complying with the regulatory mandates.from a negative 7,919,546 from prior year.(iii) regional programs, including Tele-edu-That equates 7.6 million for an average-According to CHI’s Annual Report as ofcation, Rural Hospital Program, and eightsized community hospital (161 beds).the fiscal year ended June 30, 2017, CHI’sArea Health Education Centers (AHECs)More broadly, the American Hospitalloss from operations was approximatelylocated throughout the state; (iv) the Win-Association suggested that the average com- 585,247,000. Dignity Health’s Form 990throp P. Rockefeller Cancer Center Institute;munity hospital spends 7.6 million annu-for the tax year beginning July 1, 2015, and(v) Harvey and Bernice Jones Eye Institute;ally on administrative costs to meet a subsetending June 30, 2016, showed Revenue less(vi) Donald W. Reynolds Institute on Aging;of federal mandates that cut across qualityExpenses of a positive 31,219,525, but down(vii) Myeloma Institute for Research andreporting, record-keeping and meaningfulfrom the prior year of positive 494,850,341.Therapy; (vii) Psychiatric Research Insti-use compliance.tute; (viii) Jackson T. Stephens Spine Neu-Baptist Health, Little RockLittle Rock, ArkansasGeneral-Acute Care Hospital PerformanceSt. Vincent Infirmary, Little Rockrosciences Institute and (ix) TransitionalBaptist Health, Little Rock, is not a sub-Research Institute. Therefore, its revenuesidiary of a multi-hospital organization. Itsless expenses cannot be compared to CHIForm 990 for the tax year beginning Janu-St. Vincent Infirmary, Little Rock, or Bap-ary 1, 2015 and ending December 31, 2015,tist Health.showed revenue less expenses of approxi-According to the UAMS Audited Finan-St. Vincent Infirmary Medical Center,mately positive 49 million, up from priorcial Statement the tax year beginning July 1,d/b/a CHI St. Vincent Infirmary, in Littleyear of a positive 42 million. According2016, and ending June 30, 2017, showed anRock, Arkansas, and CHI St. Vincent Northto it Medicare Cost Report, Baptist Healthoperating loss of approximately a negativeare owned by Catholic Health Initiativesshowed a positive net income of about 33 86 million, up from the operating loss in(CHI).million with 843 licensed beds and an Occu-2016 of approximately a negative 5 million.pancy Rate of 52%.After adding back nonoperating revenuesAccording to the 2005 IRS Form 990,Return of Organization Exempt fromIncome Tax (Income Tax Return), for theof State Appropriations of about 31mil-UAMS Medical Centerlion, Gifts of about 20 million, Investmenttax year beginning July 1, 2015, and endingThe UAMS is a state-assisted academicIncome of about 24 million, a deduction forJune 30, 2016, CHI St. Vincent Infirmary, Lit-health center composed of (i) the CollegesInterest on Debt of approximately 11 milliontle Rock, showed revenue less expenses ofof Medicine, Pharmacy, Nursing, Healthand Gain on Disposable Assets of 133 thou-a negative 18,088,329, up from prior yearProfessionals, Public Health, Graduatesand, the net income for the fiscal year endednegative 13,015,256. In addition, St. Vin-School, and Northwest Arkansas Satel-June 30, 2017, was approximately a negativecent Medical Group’s Form 990 for the taxlite Campus; (ii) the University Hospital of 20 million down from a positive net incomeHealthcare Journal of little rockIMAR / APR 201815

Hospital Finances16for the fiscal year ended, June 30, 2016, of aShared Savings Programs (MSSP). UAMSone-half of the fiscal year end left to makepositive 19 million. The Audited Financialand Baptist Health will share in any sav-up the 32 million gap, keep the deficit at 39Statement, which was prepared by KPMG,ings generated for the treatment of Medicaremillion and come up with a deficit-free bud-indicated while a 1.3% increase in operat-patients attributed to the ACO, but will alsoget for fiscal year, 2019, it was reported oning revenue was experienced in 2017, UAMSshare in any losses if costs exceed currentJanuary 10, 2018, that during the weekend ofincurred higher operating expenses duringbaseline amounts. Members of the Legisla-January 6, 2018, it reduced its work force bythe year. The leading increase in operatingture’s Joint Performance Review Commit-600 positions, including 258 layoffs. UAMSexpenses were compensation and benefitstee have questioned the UAMS’s contract forexpects that the job cuts will save UAMSexpenses, which increased by approxi-emergency room and orthopedic servicesbetween 26 million to 30 million this yearmately 59 million, or 6.4%. This increaseat Baptist Health Medical Center-Conway.and up to 60 million in fiscal year 2019. Inwas primarily due to the staffing requiredThe Committee wants UAMS to appear onaddition, on January 10, 2018, it has beento support higher inpatient and outpatientJanuary 25 and “answer questions aboutreported that UAMS will have new reduc-volumes. Also, supplies and other servicesthe nature of the contract,” said Represen-tions which shall come on top of the 600increased by approximately 42 million, ortative Mark Lowery, R-Maumelle, who is apositions, including the 258 layoffs. It has9.5%, largely for medical supplies, primarilyco-chair of the committee. Certain aspectsbeen reported that the 258 layoffs, includ-for surgeries, and drugs and medicines forof the UAMS/Baptist Health affiliation haveing faculty, took place on Monday, Januaryboth inpatient and outpatient care.been criticized by Conway Regional Medical8, 2018. It has also been reported on Janu-According to the Economic Outlook Sec-Center System’s President and CEO, Mat-ary 10, 2018, that more staff reductions aretion of the Audit’s Management’s Discussionthew Troup, who has said that he thoughtto come at UAMS, including tenured or ten-and Analysis, looking ahead, UAMS antic-the arrangement between UAMS and Baptisture-track faculty of as many as 45 such fac-ipates a further decline in net position ofHealth Medical Center-Conway was unfairulty members, once UAMS lawyers work out 39 million, based on fiscal year 2018 bud-competition.the terms under which they may be let go.get projections. UAMS, in collaboration withUAMS’s 2018 budget projections of a defi-These notifications could come in two-to-Baptist Health, is forming an accountablecit of 39 million was approved by the UAfour weeks and could be followed by fur-care organization (ACO) under the rulesSystem Board of Trustees, a figure that couldther reduction in work force in the new year.established by the Centers of Medicarereach approximately 72 million by the endUAMS has contracted with Huron Consult-and Medicaid Services (CMS) for Medicareof this fiscal year. Since there is only abouting of Chicago to look at such changes. nMAR / APR 2018IHealthcare Journal of little rock

Healthcare Journal of little rockIMAR / APR 201817

Q & A withDoug Ross, MDCMO, CHI ST. VINCENTCHI St. Vincent recently announced thepromotion of Dr. Doug Ross to SeniorVice President and Chief Medical Officer. Dr. Ross, of Hot Springs, previously wasvice president of medical affairs for CHI St.Vincent Hot Springs. In his new position, hewill oversee medical services throughout theCHI St. Vincent system.Ross has played a key role in helping CHISt. Vincent develop an integrated emergencymedical group covering all four CHI St. Vincent hospitals in central Arkansas and ConwayRegional Medical Center. He has also playedan essential role in quality improvements atCHI St. Vincent Hot Springs.Ross joined what was then Mercy Hot Springsin 2003 as an emergency medicine physician.He has also served as chief of staff, medicaldirector of informatics and medical director ofthe emergency department.He is board certified in emergency medicineand he completed his residency in emergencymedicine at the University of South Carolina.He is a graduate of the University of Arkansasfor Medical Sciences.

dialogueChief Editor Smith W. Hartley With such alarge system as CHI St. Vincent, what isthe role of Chief Medical Officer?Dr. Doug Ross My role as Chief Medical Offi-cer is to make sure that every patient thatenters our doors achieves the highest clinical quality and best outcomes. We want ourpatients to understand our focus on patientsafety as our number one priority. In addition, I want every patient at any of our campuses across Arkansas to feel the care andcompassion of our coworkers and physicians. I believe a Chief Medical Officer mustbe innovative and create new and efficientprocesses to accomplish these goals.Editor As the newly appointed Chief Med-ical Officer of CHI St. Vincent, what aresome of your first priorities?Dr. Ross I think my first priority as the newChief Medical Officer at CHI St. Vincent isto develop relationships. We hav

TENET The second largest for-profit multi-hos-pital organization is Tenet Healthcare Corp. (Tenet). According to its Form 10-K filed on February 26, 2018, for the year ended December 31, 2017, Tenet reported reve-nue before doubtful accounts for the year ended December 31, 2017, of 20,613 mil-lion compared to 21,070 million for the year