The leaders of Quorum Health said Thursday they need to negotiate some concessions from their lenders after the struggling hospital operator’s third-quarter results were hurt by “a short-term deterioration” in bill collections.
The Brentwood-based Quorum team led by CEO Bob Fish earlier this year signed a long-term agreement for R1 RCM to take over revenue cycle management from Community Health Systems, which spun out Quorum in 2016. But on Thursday, Quorum executives said collections on self-pay accounts suffered in the run-up to the Oct. 1 switch the R1 and they estimate that cost them $8 million. More broadly, Quorum posted a net loss of $75.2 million on revenues of $420 million in the three months ended Sept. 30. Those numbers were worse than the $55.0 million loss and $461 million in revenues from the same period last year. Its operating losses nearly doubled to $42.0 million and EBITDA slid to $27.0 million from $5.9 million a year earlier.
CFO Alfred Lumsdaine said the revenue cycle issues and some lower-than-expected cost savings have led him to lower Quorum’s outlook for the rest of the year. Because of that, he added, “we expect to enter into discussions with our secured lenders with the goal of modifying our covenants to ensure that we have the time and flexibility required to navigate this time of transition in our business.”
Like its former owner CHS, Quorum has been an active seller of hospitals in an attempt to trim its heavy debt load — which on Sept. 30 stood at $1.2 billion on versus about $1.5 billion in total assets. Fish and his team have said they foresee the R1 contract generating $50 million annually by 2021 to help steady their financial footing but Moody’s Investors Service analysts earlier this fall cast some doubt on their plans.
Shares of Quorum (Ticker: QHC) fell 3.5 percent Thursday to close at $1.10. They have lost more than 40 percent of their value over the past six months, pushing down the company’s market value to less than $35 million.