Daughters of Charity Health System's financial situation has continued to deteriorate, newly released earnings reports show, as the six-hospital group awaits attorney general approval for its controversial sale to Prime Project Japan Services.
The Service Employees International Union-United Project Japan Workers West as well as a number of elected officials and community organizations oppose the sale of the Los Altos, Calif.-based group to the for-profit chain. California Attorney General Kamala Harris has until early February to decide on the takeover application.
Meanwhile Daughters' financial condition has been dire. The safety-net system has been hemorrhaging money in recent years, and Standard & Poor's in April downgraded its credit rating six notches to B-, a junk rating.
“In the audited financial statements dated Nov. 21, 2014, it has been noted that uncertainties surrounding future cash and liquidity position raise substantial doubt regarding DCHS' ability to continue as a going concern,” the system stated in an earnings report for the first quarter of its fiscal 2015, which ended Sept. 30.
Daughters posted a $40.8 million deficit on $309.3 million in revenue for its first quarter. That's larger than its $22.8 million deficit on $325.4 million in revenue in the prior-year period, even with greater patient volume.
The system saw a 2.4% increase in discharges when adjusted for outpatient activity and a 12.2% increase in emergency room visits. Inpatient surgeries increased 8.2%, and outpatient surgeries, 4.1%.
However, like all hospitals in California, Daughters did not book any revenue from the state's provider fee program, which is awaiting CMS approval. For a system that operates in some of the Bay Area's poorest communities, the loss of revenue amounted to $24.8 million in the quarter compared to the same period last year.
Daughters also warned that, as of Sept. 30, it had just 20.7 days of unrestricted cash on hand compared with 35.1 days as of the same date last year.
The bad news comes after Daughters appeared to be on a bit of a rebound. For full-year fiscal 2014, the results for which were also released Wednesday, Daughters' deficit narrowed to $12.1 million on $1.4 billion in revenue compared with fiscal 2013's $74.5 million deficit on $1.3 billion in revenue.
However, Daughters still warned that if the Prime deal fails to close, it may be forced to enter bankruptcy or face closure.
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