ManorCare Helps Bolster ProMedica’s Financial Fortunes Amid Insurance Struggles

ProMedica Health System’s struggles with its insurance arm hit the non-profit’s bottom line throughout 2019, but the addition of skilled nursing operator HCR ManorCare contributed to a significant increase in total operating revenue for the year.

In its unaudited financial report for the 2019 calendar year, the health system reported that its operating performance for the year fell short of 2018 by almost $41.2 million. The ProMedica Insurance Corporation contributed an operating loss of $76.3 million for the year, “primarily related to operating challenges within the Paramount Advantage (Medicaid) product line.” That compared with operating income of $7.4 million in 2018 from the insurance arm.

Becker’s Hospital CFO Report first reported the news.

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Total operating revenue for ProMedica increased by $1.9 billion, or 39%, in 2019, compared with 2018, mainly because of the addition of ManorCare — a full year of revenue led to an additional $1.7 billion for the health system, as compared with five months of revenue from the SNF operator in 2018. But total operating expenses rose by the same amount of $1.9 billion, with almost $1.6 billion “related to seven additional months of HCR ManorCare expenses in 2019, compared with 2018.”

The senior care division of ProMedica — which includes ManorCare and its family of companies offering assisted living, outpatient rehabilitation, hospice and home care services — accounted for approximately 46% of operating revenue for the health system. The insurance and provider divisions accounted for 28% and 26% of operating revenue, respectively.

ManorCare also helped contribute to the reduction of bad debt and charity care as a percentage of operating revenue, which fell from 4.4% in 2018 to 3.2% in 2019.

At the beginning of 2020, ProMedica announced that Paramount Health Care, its managed Medicaid arm, would scale back its footprint in response to the plan’s financial losses, exiting the central and southeast regions of Ohio and cutting its overall enrollment by about 31,000 beneficiaries.

The Toledo, Ohio-based health system acquired the operations of ManorCare in 2018, in a three-way deal with the real estate investment trust Welltower (NYSE: WELL).

The deal resulted in some setbacks in the form of credit downgrades for the health system after it closed; the most recent occurred on Christmas Eve, according to the financial report, when S&P Global Ratings affirmed its BBB rating on the ProMedica Healthcare Obligated Group and lowered its outlook from “stable” to “negative.”

However, in that same report, S&P did express optimism about how management was dealing with some of the managed Medicaid challenges in the insurance arm — and specifically highlighted the work at the skilled nursing operator.

“We believe this, along with improving performance at legacy HCR ManorCare and at the legacy ProMedica provider organization, precludes a lower rating at this time,” S&P’s Anne Cosgrove, Suzie Desai, and Kenneth Gacka noted in a statement announcing the change.

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