Allegheny Health Network 3rd quarter financials exceed expectations
Allegheny Health Network reported operating income of $5.4 million in the third quarter of 2018, marking its sixth consecutive reporting period with positive operating income.
“We’re very pleased with our performance in the third quarter. We’ve been very steady in our performance. I’m very pleased with where we are at,” Chief Financial Officer Jeff Crudele said. “Through the third quarter, we continue to have results that exceed our expectations and we’re comfortable with our progress.”
Crudele said the most important highlight of the quarter for AHN was the completion of a $1 billion refunding of its existing bond issue.
On Aug. 29, AHN finalized a $943.4 million bond sale that refunded existing debt, he said. S&P Global Ratings gave the long-term bonds an “A” rating with a stable outlook.
Because of the one-time, $7.5 million cost associated with the bond issuance, spokesman Dan Laurent said net income for the quarter ended Sept. 30 was flat, spokesman Dan Laurent said.
The refunding “takes our debt structure and transforms it into a long-term debt structure from the short-term maturities we previously had,” Crudele said. “It fixes the interest rate at very favorable interest rates going forward. It’s a milestone achievement.”
For the first nine months of 2018, AHN reported operating income of $29.2 million and net income of $18 million.
Total operating revenue for the third quarter was $821.9 million and $2.4 billion through the first nine months of 2018, an increase from the previous year’s $2.29 billion total through nine months.
Patient volumes for the third quarter and year-to-date are consistent with previous years, Laurent said. The network saw increases in total physician visits, observations and ambulatory surgery center cases in the first nine months compared to last year.
“AHN continues to make investments in its infrastructure and programs with the goal of enhancing patient access and experience across the system,” Laurent said.
In the third quarter, AHN broke ground on a 160-bed community hospital in Pine expected to open in 2021, and a neighborhood hospital in McCandless expected to open in late 2019.
It also opened an outpatient center in O’Hara and a medical center in downtown Pittsburgh during the quarter.
“We continue to make investments in the system,” Crudele said. “We believe there’s an opportunity to optimize and accelerate our transition to value-based care. Our results are allowing us the flexibility to do that.”
Also in the third quarter, AHN signed an affiliation agreement with Warren General Hospital as part of a joint venture with LECOM Health.
“The affiliation is designed to help further enhance the availability of high-quality, high-value health care services close to home for those who live in Warren County and the Northwestern Pennsylvania region,” Laurent said.
Included in the results are what Crudele called “some negative headwinds,” including a $13 million reduction in Medicare reimbursements for drugs over the first three quarters that the network was able to absorb.
“Our results include that,” he said. “They would have been that much better had we not had that occur.”