(Louisville Business First) - KentuckyOne Health's assets that are being marketed for sale posted millions in losses for fiscal 2017.
Despite the losses, the sale of Jewish Hospital and other KentuckyOne assets based in Louisville should close by the end of the calendar year, according to a year-end financial report from KentuckyOne's parent organization, Denver-based Catholic Health Initiatives.
KentuckyOne Health Inc. announced in May that it would sell all but one of its facilities in Louisville and Martin, Ky. The facilities up for sale have 519 licensed beds, according to the financial report, and are valued at more than a half a billion dollars.
Financial results for 2017
Jewish Hospital and St. Mary’s Healthcare (JHSMH), the corporation that owns Jewish Hospital and merged with merged with Lexington’s Saint Joseph Health System to create KentuckyOne, posted a $43.9 million loss for fiscal 2017, ended June 30, according to the CHI financial report. Last year, it posted a $45.4 million loss.
For the last three months of fiscal 2017, JHSMH posted a $16.9 million loss.
Annual revenue for JHSMH rose 3.7 percent, to $780.7 million for fiscal 2017 from $752.9 million a year earlier. Revenue for the fourth quarter rose 7.2 percent, to $183.5 million.
The whole of KentuckyOne Health had earnings before income taxes, depreciation and amortization of $115.6 million in 2017, down 31.1 percent from a year earlier.
Labor costs hurt earnings
KentuckyOne's unfavorable financial results were caused by operational expenses outpacing net patient service revenues, according to the report.
One of those expenses was labor costs. In 2017, labor costs as a percentage of net patient service revenues were 43.4 percent, up from 40.6 percent in 2016. This accounted for $42 million in additional expenses.
"The (Kentucky) region is continuing its efforts to address nursing and other staff shortages which have resulted in increases to overall labor costs, including contract labor costs, overtime and premium pay," the report states.
KentuckyOne reduced its workforce in 2017 by 604 full-time-equivalent positions — eliminating 315 contract nursing positions and 289 other unspecified jobs — and released 50 physicians from employment contracts.
KentuckyOne and Louisville region receiving additional leadership
The report also states that the Louisville region of KentuckyOne will be operated separately from CHI's operations in the rest of the state during the transition period surrounding the sale of the Louisville assets.
CHI said it has deployed a corporate leadership team focused on improving operations, improving day-to-day performance, addressing staffing shortfalls and improving patient throughput and quality. The report does not say when this corporate leadership team started its work or how long it lasted.
CHI's national director of media relations, Michael Romano, said in an email that KentuckyOne leadership continues to oversee daily operations for KentuckyOne facilities.
CHI said in a news release that it has been involved in a comprehensive performance improvement plan for 2017 and will continue operational improvements and cost-reduction efforts into fiscal 2018.
Where KentuckyOne fits in CHI
KentuckyOne brought in about 10.4 percent of CHI's revenue in 2017, which is fifth most of the 10 regions in the organization, according to the report.
Total revenue for CHI in fiscal 2017 was $15.5 billion, up from $15.2 billion a year earlier.
CHI now is the sole sponsor of KentuckyOne after CHI gave Jewish Heritage Fund for Excellence $150 million in exchange for its 17 percent ownership stake in KentuckyOne.
Louisville Business First