ProMedica HCR ManorCare Integration Off to a Rough Start

ProMedica finalized the transaction in 2018 that added HCR ManorCare operations to the ProMedica organization. HCR ManorCare, the nation’s second largest post-acute and long-term care provider, has enabled this partnership with ProMedica to significantly scale its system. The combined organization provides a wide breadth of services and capabilities, including: a hospital system, a physician group, telehealth, several health plans, an academic affiliation, skilled nursing, assisted living, rehab, home health and hospice.

ProMedica announced its financial results after acquiring HCR ManorCare, and the organization reported $70 million in losses for fiscal 2018. Revenue for 2018 was approximately $4.9 billion, an increase from $3.1 billion in fiscal 2017.

Approximately $1.3 billion came from ManorCare’s 170 skilled nursing facilities, 55 assisted living properties, and 120 home health and hospice entities in just five months on the books for the year.

ProMedica reported that total operating expenses increased by $1.7 billion, with nearly $1.3 billion related to acquisitions of HCR ManorCare and a rural hospital. ProMedica realized a $135 million profit in 2017. The ManorCare deal also substantially boosted ProMedica’s debt levels, which rose from $990 million in December 2017 to $2.37 billion at the end of last year.

ProMedica emphasized in its financial release that the company only recorded five months’ worth of revenues related to ManorCare, with post-acute care representing only 28% of the company’s total finances. That number will increase to about 50% as the integration process reaches its completion, according to the company.

The company has restructured its leadership team, shrinking the size of its overall board and cutting the number of standing committees, while also implementing subsidiary-level boards.

ProMedica strengths include clinical programs that HCR ManorCare operations can benefit from, including wound care expertise. Contracting with commercial health insurers can get better by using the data and processes that ProMedica has obtained by operating a successful managed-care health plan, Paramount, for 30 years.

Hospitals are trying to place patients in the most appropriate cost setting for their conditions. Having HCR ManorCare integrated with a hospital system gives it a leg up in pricing new care models. Such models focus on a bulk price for an episode of illness or injury rather than a fee for every service rendered. It’s the shift to so-called value versus volume.