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Analysis: Hospitals Buoyed by Tenuous Investment Income

Investment income resulting from a strong stock market has propped up many standalone hospitals’ balance sheets over the past two years, according to a recent evaluation by Juniper Advisory. In analyzing a sample of independent hospitals’ financials, Juniper Advisory found that investment income accounted for nearly half of the hospitals’ net margin. Hospitals that depend heavily on investment revenue could struggle to keep their doors open in the next economic downturn.

“Like any business, hospitals should not consistently rely on investment income to support their day-to-day operations,” said David Gordon, Principal, Juniper Advisory. “We’ve been watching the ongoing economic growth, which is good for both hospitals and their patients, but the economy will not always be as strong as it has been the last few years. When that time comes, hospitals will have to demonstrate that they can provide care much more cost-efficiently.”

Juniper Advisory reviewed the most recent audits available for a sample of 90 independent hospitals in California, Florida, Illinois, Indiana, Iowa, Minnesota, Ohio, Texas and Wisconsin. The average annual revenue of the sampled hospitals was $437 million.

Key findings of Juniper Advisory’s analysis include:
• 61% of hospitals had operating margins under 3%
• The average operating margin was -0.8% and average

February 27th, 2019|Uncategorized|

In the News: Healthcare executives expect M&A to boost business in 2019

Healthcare executives expect their businesses to exceed 2018’s benchmarks and will largely use mergers and acquisitions to reach those expectations, according to a new survey.

Nearly three-quarters of 291 senior executives from pharmaceutical, healthcare IT, medical technology, hospital and health system organizations said they expect better business performance in 2019, according to a new Capital One poll.

Mergers and acquisitions are the preferred growth plan for 44% of executives, down from 50% last year. That strategy mirrors the last three year’s polling results.

Health systems are also building regional hubs within and across state lines. Scale can help them negotiate better rates with suppliers and payers and expand patient access through boosting investment in outpatient facilities and telemedicine. Crunching data on regional populations can also reveal the most profitable service lines, clinical quality performance, their current position with payers and the strength of their physician network.

But mergers and acquisitions can fall short when far-flung organizations can’t unify their operations. Redundant executive roles may slow decision-making and inflate expenses. Standardizing electronic health records and enterprise resource planning platforms can

IRMC and Cleveland Clinic Finalize Partnership

The intensive 18-month effort to secure Indian River Medical Center’s future neared its conclusion on October 3, 2018 as the IRMC Board of Directors and the Indian River County Hospital District Trustees voted to approve a series of agreements that will result in IRMC joining the Cleveland Clinical Studies system. Juniper Advisory is serving as Indian River’s advisor in this transaction.

Under the terms of the transaction, Cleveland Clinic is committing to invest at least $250 million in IRMC over the next 10 years.

“This is an extraordinary day in the history of our community,” said IRMC Board Chair Dr. Wayne Hockmeyer. “People across the country and across the world know that Cleveland Clinic stands for world class healthcare, and they will be partnering with the exceptional staff, physicians and nurses at IRMC to provide that level of care right here in Vero Beach for years to come.”

After a public meeting on Sept. 25 where advisors and legal teams shared the details of the agreements, board members and trustees took the last week to pore over those details and deliberate about their decision. In separate public meetings today, the IRMC Directors and IRCHD