0
For the Period Ended September 30, 2020
Unaudited Quarterly Disclosure
1
Tower Health Overview
Tower Health (“Tower Health” or the “System”) is a Pennsylvania nonprofit corporation that serves as the parent organization of seven acute care hospitals, an inpatient behavioral health facility, and related facilities that have formed an integrated healthcare system located in the Counties of Berks, Chester and Montgomery, Pennsylvania and the City of Philadelphia, Pennsylvania.
Brandywine Hospital in Coatesville (171 licensed beds);
Chestnut Hill Hospital in Philadelphia (148 licensed beds);
Jennersville Hospital in West Grove (63 licensed beds);
Phoenixville Hospital in Phoenixville (137 licensed beds*);
Pottstown Hospital in Pottstown (232 licensed beds*);
Reading Hospital, a teaching hospital in West Reading (738 licensed beds*, including 62 beds at a dedicated rehabilitation hospital); and
St. Christopher’s Hospital for Children, in partnership with Drexel University (188 licensed beds)
On July 14, 2020, Tower Behavioral Health, a 144-bed inpatient facility and ambulatory campus opened under a joint venture with Acadia Healthcare.
Tower Health Medical Group, a network of more than 128 primary care and specialty care practices, that includes 890 physicians and 411 Advanced Practice Providers.
Tower Health Urgent Care - Tower Health acquired 19 urgent care locations from Premier Urgent Care in 2018 and has added 4 new locations, making Tower Health the largest operator of urgent care centers in the metropolitan Philadelphia area according to the Philadelphia Business Journal
Tower Health at Home, one of the region’s largest regional home health and hospice organizations
Tower Health Partners, a clinically integrated physician network with more than 3,100 providers
Tower Health – UPMC Health Plan, a joint venture with UPMC Health Plan that offers affordable health insurance coverage and access to high quality care in nine counties, with over 50,000 member lives in all lines of business including Medicare Advantage, Administrative Services Only (ASO) for self-insured employers, Individual (Exchange), as well as Commercial Group, Special Needs Plans (SNP), Managed Medical Assistance, and Children’s Health Insurance Program (CHIP).
Drexel University College of Medicine at Tower Health – 120,000 square feet of new Medical School located ½ mile from Reading Hospital that will educate 200 enrolled medical students annually – starting July 2021
Medical Education Expansion to 600-700 Residents and Fellows.
*Number of licensed beds, excludes nursery
2
Tower Health at a Glance (excluding St. Christopher’s)
1) 2020 Environics Analytics Estimate based on Tower Health combined PSA 2) FY2019 market share based on Tower Health combined PSA 3) Excludes nursery beds and Observation; Includes 62 beds at Reading Hospital Rehabilitation at Wyomissing 4) Current as of June 30, 2020; includes THMG, THP, THUC, THAH, TowerDirect and all hospitals except St. Christopher’s 5) Excludes normal newborns 6) Includes residents; 890 physicians and 411 APPs; source THMG as of June 30, 2020 7) Includes THMG, THP, THUC, THAH, Clinics, Foundation, and all hospitals except St. Christopher’s 8) Actual THMG primary and specialty care visits 9) Includes 12,185 inpatient and 16,427 outpatient surgeries; Excludes endoscopies * All data is FY2020 unless otherwise noted
St. Christopher’s Hospital for Children At-A-Glance (Dec 2019 - June 2020)
(1) 2020 Environics Analytics Estimate (2) FY2019 PHC4 inpatient data; Patients age 0-17 (3) Current as of June 30, 2020 (4) Includes St. Christopher’s Hospital for Children only (5) Includes 476 inpatient and 2,246 outpatient surgeries; Excludes endoscopies * All data is Dec 15, 2019-June 30, 2020 unless otherwise noted
64,085Total
Admissions(5)
12,162 Employees
(10,362 FTEs)(4)
906,277PSA Population(1)
1,432Staffed Beds(3)
$1.71 billionRevenue(7)
28,612Total Surgeries(9)
44%PSA Inpatient
Market Share(2)
4,643Babies Delivered
246,408Emergency Room Visits
328,618Patient Days(5)
122,219Adjusted
Admissions
1,301Employed Physicians and
Healthcare Providers(6)
1.76 millionPhysician Office Visits(8)
240,245PSA Pediatric
Population(1)103
Staffed Beds
2,722Total Surgeries (5)
30.2%PSA Pediatric
Inpatient
Market Share (2)
27,223Emergency Room Visits
13,670Patient Days
$206 MRevenue (4)
2,434Total
Admissions
5,309Adjusted
Admissions
2,034 Employees
(1,589 FTEs)(3)
3
Awards
Reading Hospital
Verras' Medical Value Index™: One of 10 Best Value Hospitals in Pennsylvania Centers for Medicare & Medicaid Services:
5-Star Rating for Overall Hospital Quality
Healthgrades • 100 Best Hospitals’ Award™ (2017-2020)
• America’s 250 Best Hospitals • Patient Safety Excellence Award (2020)
4
Awards (cont’d)
Brandywine Hospital, Chestnut Hill Hospital, Jennersville Hospital, Phoenixville Hospital, Pottstown Hospital
Phoenixville
Chestnut Hill Phoenixville
Phoenixville PhoenixvillePottstown
Phoenixville
Chestnut Hill
Phoenixville
Phoenixville Pottstown
Chestnut Hill
Pottstown Brandywine Phoenixville
Phoenixville
Phoenixville Pottstown
Brandywine Jennersville Phoenixville Pottstown
Brandywine Jennersville Phoenixville Pottstown
Brandywine Chestnut Hill Phoenixville Pottstown
Pottstown Phoenixville Pottstown
Jennersville
Pottstown
Chestnut Hill Pottstown
Brandywine Pottstown Chestnut Hill
Brandywine
• Joint Commission Gold Seal of Approval for:- Hip and Knee Replacement (2018)- Acute Myocardial Infarction (AMI) (2019)
- Wound Care (2019)- Advanced Certification in Stroke - Primary Stroke Center
(2018)
- Laboratory (2019)
Chestnut Hill• Joint Commission Certified Advanced Primary Stroke Center
(2020-2022)• Joint Commission Accredited - Laboratory (2019)
Jennersville• Joint Commission Gold Seal of Approval – Laboratory (2018)
Phoenixville
• Joint Commission Advanced Heart Failure Disease Specific Certification (2018)• Joint Commission Advanced Total Joint Replacement Disease Specific
Certification (2018)
• Joint Commission Accredited Primary Stroke Center (2019)
Pottstown
• Joint Commission Gold Seal of Approval for:- Hip and Knee Replacement (2018)- Primary Stroke Center Designation (2018)- Laboratory (2019)
All Hospitals• Joint Commission Hospital Accreditation
5
Awards (cont’d)
St. Christopher’s Hospital for Children
2019
Verified PediatricBurn Center
RICHARD ROBINSON
AWARD St. Christopher’s Pediatric
Associates Center for the Urban Child
- Reach Out and Read -
Level 1Pediatric
Trauma Center
45 St. Christopher’s Hospital for Children
Physicians included in Top Docs 2019
Enitan Adegite, MD, Adolescent Medicine L. Grier Arthur III, MD, Pediatric Surgery
Kiersten Arthur, MD, Sports Medicine Brooke Burkey, MD, Plastic Surgery
Alison Carey, MD, Neonatology Karen Carvalho, MD, Neurology
Janet Chen, MD, Immunology & Infectious Diseases
Daniel Conway, MD, Immunology Gregory Dean, MD, Urology
Nicole DeLarato, MD, Ophthalmology Shuping Ge, MD, Cardiology
Paul Glat, MD, Plastic Surgery Donald Goldsmith, MD, Rheumatology
Jeremiah Goldstein, MD, Pediatrics Harsh Grewal, MD, Pediatric Surgery
Gregory Halligan, MD, Oncology Martin Herman, MD, Orthopedic Surgery Keith Herzog, MD, Infectious Diseases Folasade Kehinde, MD, Neonatology
Shareen Kelly, MD, Pediatrics Hans Kersten, MD, Pediatrics
Roberta Laguerre, MD, Pediatrics Svetlana Lvovich, DO, Rheumatology
Nandini Madan, MD, Cardiology Francis McNesby Jr., MD, Pediatrics
Joseph Melvin, DO, Neurology C. Igor Mesia, MD, Cardiology
Kathleen O’Brien, MD, Sports Medicine Michael Packer, MD, Urology Nadja Peter, MD, Pediatrics
Rajeev Prasad, MD, Pediatric Surgery Jonathan Roth, MD, Urology
Marta Rozans, MD, PhD, Oncology Deborah Sandrock, MD, Pediatrics
Robert Spector, MD, Ophthalmology Elizabeth Suarez, MD, Endocrinology
Daniel Taylor, DO, Pediatrics Renee Turchi, MD, Pediatrics
Laurie Varlotta, MD, Pulmonology Alan Zubrow, MD, Neonatology
David Zwillenberg, MD, Otolaryngology
2017-2020 ECMO Team at
St. Christopher’s Hospital for Children
6
Service Area – Primary Service Area and Secondary Service Area
The Tower Health Primary Service Area
(PSA) accounts for 75% of Tower’s general
acute care hospitals’ combined inpatient
discharges using the top-volume zip codes
and adjusting for contiguous zip codes.
The Tower Health Secondary Service Area
(SSA) accounts for an additional 15% of
combined inpatient discharges from
Tower’s general acute care hospitals.
Displays Tower Health Hospitals and its top 10 competitors in terms of total discharges.
7
Recent Events
Tower Health Strategic Highlights
Tower Behavioral Health Opens in Reading
Tower Behavioral Health, a joint venture between Acadia Healthcare and Tower Health, opened on July 14, 2020. The new behavioral health facility will initially offer acute inpatient care for adults age 18 and older. When fully operational, Tower Behavioral Health will include 144 inpatient beds and will offer inpatient psychiatric care for children, adolescents, adults, and seniors; partial hospitalization program (PHP); intensive outpatient program (IOP); dual diagnosis services; outpatient counseling; and physician services and consultations.
Tower Health Opens Three New Urgent Care Locations
Tower Health opened three new Tower Health Urgent Care facilities in July and August: North Coventry on July 6, Sinking Spring on July 20, and Thorndale on August 3. All Tower Health Urgent Care facilities are open 365 days a year from 9 a.m. to 9 p.m. to provide walk-in care for a variety of conditions. All Tower Health Urgent Care Centers use Epic, the electronic medical record that integrates care across Tower Health.
Reading Hospital Performs Berks County's First Trans-Carotid Transcatheter Aortic Valve Replacement
Reading Hospital’s cardiovascular team recently performed the first trans-carotid transcatheter aortic valve replacement (TAVR) in Berks County. Replacing a damaged aortic valve via the carotid artery, located on the side of the neck, is a significant advancement for patients unable to undergo the more common approach through the large artery (femoral) in the thigh. This alternative treatment option provides a lifesaving procedure for patients who are not surgical candidates for the traditional aortic valve replacement and have no other treatment options.
St. Christopher’s Hospital for Children Appoints Donald Mueller as CEO
Donald Mueller joined St. Christopher’s Hospital for Children as President and Chief Executive Office on July 27, 2020. Don joins St. Christopher’s from his role as CEO of Children’s Hospital at Erlanger in Chattanooga, Tennessee. Don is a highly skilled and experienced executive, with an extensive and successful background in developing high-quality pediatric clinical programs; recruitment of physicians and researchers; strengthening nursing; and building effective partnerships with the community.
Karen Restifo, MD, JD, Named Inaugural Vice Dean of Drexel University College of Medicine at Tower Health
Karen Restifo, MD, JD, was named regional vice dean of Drexel University College of Medicine's Tower Health campus in West Reading, effective September 1, 2020. Dr. Restifo comes from the Keck School of Medicine of the University of Southern California, where she served as associate dean of student affairs. During her tenure there, she helped with preparation for a Liaison Committee on Medical Education (LCME) full accreditation site visit. She also served on numerous committees, including the Student Performance Committee, Student Affairs Committee, Medical Education Committee, Diversity Council, and the Wellness Task Force. She played a role in the development of Keck School of Medicine's new MD program curriculum.
8
Recent Events (cont’d)
Tower Health Prepares for Resurgence of COVID-19 Cases
Tower Health has the necessary policies and protocols in place to manage a surge in inpatient COVID-19
cases. Not only do our caregivers have a better understanding of the disease, its process, and how to manage
its symptoms, Tower Health has also:
Expanded its in-house coronavirus testing capabilities, speeding diagnosis.
Expanded a range of virtual and telemedicine services that allow patients to engage with their healthcare providers while reducing the need for in-person interactions.
Carefully managed our PPE and testing supply chains and inventories.
Rigidly monitored that our facilities are clean and safe for patients, visitors, and staff, including:
o temperature screening at all entry points,
o enforcing a universal masking policy,
o implementing enhanced cleaning and disinfection processes, using ultraviolet light disinfection robots in the most critical areas, and
o encouraging appropriate social distancing.
Created cohorted COVID units and ensured strict isolation for COVID positive patients.
Reduced capacity in waiting rooms, conference rooms, break rooms, eateries, etc.
Tower Health Enrolls Patients For COVID-19 Research Study
Tower Health has enrolled 40 COVID-19 patients in the "IMmunoPhenotyping Assessment in a COVID-19 Cohort" study, or IMPACC, that aims to develop effective treatments for COVID-19. Tower Health is among 10 leading medical institutions nationwide embarking on the study which is funded by the National Institutes of Health's National Institute of Allergy and Infectious Diseases. Participants are followed for 12 months after their hospitalization to assess how well they recover and whether they develop durable immunity to the virus. Tower Health is collaborating with the Drexel University College of Medicine in collecting and analyzing data.
COVID-19 Antibody Testing Available at Tower Health Urgent Care
Tower Health Urgent Care began offering COVID-19 antibody testing in July. Individuals may qualify for an antibody test if they had a confirmed case of COVID-19 and have since recovered. They may also be eligible if they previously experienced symptoms but never got tested, or were exposed to a confirmed COVID-19 positive individual more than 14 days before.
St. Christopher’s Hospital for Children to Become COVID-19 Testing Site for City of Philadelphia
St. Christopher’s Hospital for Children was awarded a grant by the City of Philadelphia to provide community COVID testing which began in October 2020. The program includes the installation of a 1,500-square-foot trailer adjacent to the parking garage for walk-up appointments and the reintroduction of drive-through testing.
9
Recent Events (cont’d)
Tower Health Leadership/Physicians Taking the Lead
Tower Health Appoints New Members to Board of Directors
Tower Health recently announced updates to its Board of Directors. Jim Boscov, Angel Helm, and William
Thornton, Jr. joined the Board effective July 1, 2020. Mr. Boscov is CEO of Boscov’s, a family-owned retail
enterprise and active in the community. Ms. Helm is a retired investment banking and finance executive with
29 years of experience in bond financing transactions for healthcare, higher education, and municipal and
corporate clients. Mr. Thornton is Co-Chair of the Litigation Department at Stevens & Lee and an experienced
securities and commercial litigator. With these new members, the total number of members on the Board of
Directors is increasing to 13 from 10.
Tower Health Expands Access and Services with Addition of New Physicians
Tower Health continues to expand access to healthcare in its communities with the addition of physicians and
advanced practice providers across the system, including:
Edward Pavillard, DO, Vascular Surgeon, Pottstown Hospital
Rouslan Tourtsev, DO, Primary Care, Pottstown Hospital
Eddy Mizrahi, MD, Cardiology, Phoenixville Hospital
Adrian Pearson, DO, Cardiology, Phoenixville Hospital
Katherine Catallo, MD, Emergency Medicine, Phoenixville Hospital
Lauren Shirley, DO, Emergency Medicine, Phoenixville Hospital
Nathan Peterson, MD, Hematology/Oncology, Phoenixville Hospital
Sophia Baig, MD, Neonatology, Phoenixville Hospital
Chestnut Hill Hospital welcomed Premier Orthopaedics, effective August 1, 2020. Jeffrey Vakil, MD, will lead
the transition for the team that includes former Chestnut Hill medical staff members Drs. Dennis McHugh,
Timothy Amann and John Pasquella.
Adanna Akujuo, MD, joined Tower Health Medical Group Cardiothoracic Surgery - West Reading. The addition
of Dr. Akujuo offers new procedures for the health system. Dr. Akujuo is an accomplished structural heart
surgeon proficient in valvular and aortic surgery with an expertise in minimally invasive valvular surgery and
complex mitral valve repair.
Reading Hospital Announces Ron Nutting, MD as Chief Medical Officer
Ron Nutting, MD was appointed as the Chief Medical Officer for Reading Hospital, effective July 19, 2020. In
this role Dr. Nutting will provide senior executive leadership to the Hospital's medical staff, while fostering quality
and innovation in medical services provided to the community. Dr. Nutting began serving as the interim Chief
Medical Officer at Reading Hospital in March 2020.
Susan Looney Appointed Vice Chair of Reading Hospital Board of Trustees
Susan Looney, J.D., Ed.D, has been appointed as the Vice Chair of the Reading Hospital Board of Trustees
effective July 23, 2020. Dr. Looney joined the Board of Trustees in June 2019. She currently serves as President
at Reading Area Community College.
10
Recent Events (cont’d)
Advancing Health. Transforming Lives. In Our Communities
Reading Hospital Saves $1 Million in Emergency Department Costs for Medicare and Medicaid Patients
A new case study released by Reading Hospital and Healthify shows the positive real-world impact Reading Hospital has made in the community by identifying and addressing social determinants of health-related needs for local Medicare and Medicaid beneficiaries. Reading Hospital formed the Community Connection Project (CCP) consortium to link the hospital with Berks County organizations such as New Journey Community Outreach, Berks Encore, and Centro Hispano. Using Healthify's platform, the CCP consortium was able to screen and refer patients for needed healthcare or other services. In just one year, Reading Hospital and the CCP consortium reduced the cost of unnecessary emergency department visits by $1 million for Medicare and Medicaid patients.
Reading Hospital Receives More Than $460,000 in Grant Funds to Fight Opioid Addiction
Reading Hospital received a $469,810 State Opioid Response grant via the Pennsylvania Department of Drug and Alcohol Programs to enhance Medication Assisted Treatment (MAT) delivered to individuals with an Opioid Use Disorder (OUD), including covering the cost of treatment and medication for uninsured individuals.
Reading Hospital Discharges 500th COVID-19 Patient
In September, Reading Hospital recognized the discharge of its 500th patient to successfully recover from COVID-19.
Reading Hospital Named One of the Top 50 Best Teaching Hospitals in the United States*
Reading Hospital was named one of the top 50 best teaching hospitals in the United States, according to a ranking released by Washington Monthly Magazine and the Lown Institute. Washington Monthly Magazine and the Lown Institute reviewed 3,359 hospitals and based scores on performance in three categories: patient outcomes, civic leadership, and value of care. Patient outcomes focused on clinical outcomes, patient safety, and patient satisfaction. Civic leadership involves community benefit, inclusivity, and pay equity. Value of care is based on an examination of rates of overuse for specific medical procedures.
* Award was received on October 20, 2020.
11
Management Discussion and Analysis
YTD Consolidated Statement of Operations for the 3-Months Ended September 30, 2020 and 2019
Long-Term Debt Service Ratio for Tower Health Obligated Group for the three months ended September 30, 2020 was 3.61x.
Note: $45 million of CARES Act funds are included in revenue for the three months ended September 30, 2020.
12
Management Discussion and Analysis (cont’d)
YTD Consolidated Statement of Operations for the 3-Months Ended September 30, 2020 (FY21 Q1) and Ended June 30, 2020 (FY20 Q4)
Note: $45 million of CARES Act funds are included in revenue for the three months ended September 30, 2020. $98 million of CARES Act funds are included in the revenue for the three months ended June 30, 2020.
13
Management Discussion and Analysis (cont’d)
Operational Performance 3-Months Ended September 30, 2020 vs September 30, 2019 and June 30, 2020
Tower Health (“Tower” or “System”) year-to-date operating performance through September 30, 2020 (Q1 FY
2021) reflects a significant increase over Q4 FY 2020. Operating income in Q1 FY 2021 was a negative $37.8
million compared to Q4 FY 2020 that was a negative $313 million. In Q1 FY 2021, total revenue increased by
79.9% over Q4 FY 2020, the System generated a negative operating margin of 6.7% in Q1 FY 2021 in
comparison to a Q4 FY 2020 operating margin of negative 99.4%. Each quarter includes CARES Act grant
funds received from the federal government. In Q1 FY 2021 we received $45 million versus $97.7 million in Q4
FY 2020. All CARES Act grant funds received were recognized and recorded in other operating revenue.
The year-to-date operating performance through September 30, 2020 (Q1 FY 2021) compared to Q1 FY 2020
reflects a decline, particularly with the five Chester/Montgomery/Philadelphia (“CMP”) hospitals. In Q1 FY 2021,
although total revenue increased by 15.0% compared with the three-month period ending September 30, 2019
(Q1 FY 2020). The System generated a negative operating margin of 6.7% in Q1 FY 2021 in comparison to Q1
FY 2020 operating margin of negative 1.9%.
Q1 FY 2021 includes $2.2 million of one-time, non-recurring expenses. Of the $2.2 million, $0.5 million was
related to EPIC implementation costs at the Urgent Care and the St. Christopher Hospital for Children project,
with the remainder related to other one-time transaction costs. Excluding the $2.2 million in one-time, non-
recurring expenses, the System’s operating income in Q1 FY 2021 was negative $35.6 million, resulting in an
operating margin of negative 6.3%, compared with negative 1.0% in Q1 FY 2020 and negative 98.3% in Q4 FY
2020.
Excluding the $2.2 million in one-time, non-recurring expenses, the System’s operating cash flow margin (as
defined on the prior page) was positive 1.8%, compared with positive 5.9% in Q1 FY 2020. The operating cash
flow margin for Q4 FY 2020 was negative 85.1%. Included in the Q4 2020 results are one-time costs associated
with the severance and unemployment costs of $18 million.
Across the system Tower has seen volumes start to recover for Q1 FY 2021 from Q4 FY 2020. Admissions are
up 17.9%, ER inpatient visits are up 18.9% and outpatient ER visits are up 37.4%. Inpatient surgeries are up
42.6% and outpatient surgeries are up 76.6%. OP registrations are up 64.5%.
Reading Hospital continued to generate significant operating income. Reading Hospital produced $53.6 million
in operating income (19.4% operating margin) in Q1 FY 2021 compared with 17.5% in Q1 FY 2020. Reading
Hospital’s operating cash flow margin* was 29.3%, compared with 25.7% in Q1 FY 2020.
Total revenue for the CMP hospitals in Q1 FY 2021 decreased 9.6% as compared with the prior year period, while total expenses (including interest, depreciation and amortization) decreased by 5.4%. The CMP hospitals’ results declined in Q1 FY 2021 as compared to the prior year period, generating an operating income of negative $12.9 million, for an operating margin of negative 8.5%, compared with the three-month period ending September 30, 2019, which had an operating loss of $6.1 million and an operating margin of negative 3.6%. The CMP hospitals generated operating cash flow* of positive $4.3 million and operating cash flow margin* of positive 2.9% in Q1 FY 2021 compared to positive $8.7 million and positive 5.2% in Q1 FY 2020. The CMP hospitals’ net income decreased to negative $12.9 million in Q1 FY 2021 from negative $6.1 million in Q1 FY 2020.
*as defined on the prior page
14
Management Discussion and Analysis (cont’d)
Strategies aimed at increasing utilization at the CMP hospitals were initiated and were continuing to produce
results until late March when the COVID-19 pandemic hit. Admissions (including newborns) in Q1 FY 2021
decreased by 4.9%, compared with Q1 FY 2020. Admissions at the CMP hospitals had previously shown an
increasing trend over the previous eight quarters.
Unrestricted Liquidity
Total balance sheet unrestricted cash and board-designated investment funds for capital improvements were
$894 million at September 30, 2020. This represents a modest decrease of $1 million from June 30, 2020.
Total days cash on hand for the System was 140 at September 30, 2020, representing a decrease of 7 days
from June 30, 2020. Net assets were $293 million at September 30, 2020. This represents a decrease of $16
million from June 30, 2020.
Included in unrestricted cash and investments above is approximately $166 million of CMS Advance Payments received during FY2020, which equates to approximately 26 days cash on hand. This amount is expected to be start to be repaid using an amortized schedule beginning April 2021
Transformational Excellence Plan (TEP)
In the 3rd quarter of FY 2020, Tower Health launched Transformational Excellence, a system-wide continuing effort to improve financial performance. In response to expected impacts of the Covid-19 pandemic, the annual margin improvement target of the Transformational Excellence was expanded since last quarter to $250 million.
The scope includes adoption of a more centralized and streamlined model for Tower Health management that will support greater efficiency and faster decision-making. These actions and system-wide teams across all functions are enabling improvements in labor productivity, management structure, administrative services, patient care delivery, clinical cost management, supply chain and other areas. Transformational Excellence has realized early success, with $34.7 million in realized savings in Q1 FY 2021 against a $26.4 million target for the quarter. As of the end of September, more than $157.7 million in specific FY 2021 initiatives have been identified and launched towards the $250 million goal to be achieved by FY 2022.
Turnaround Consultant Hired
Tower Health has engaged Guidehouse as a turnaround consultant. Guidehouse is a global consulting firm that
has deep expertise in helping hospitals and health systems transform care delivery and operations.
Tower Health and Guidehouse are developing a comprehensive set of solutions to help Tower leadership make immediate operational and financial improvements that improve the system’s bond ratings while sustaining positive care quality and safety, including:
Identifying process redesign opportunities
Redesigning workflows to increase efficiencies
Addressing duplicative or redundant service
Standardizing reporting analytics and metrics
Optimizing the supply chain and pharmacy
Assessing financial, operational, management, clinical service, and strategic issues impacting Tower’s
employed medical group
Enhancing the revenue cycle and identifying net revenue opportunities
15
Management Discussion and Analysis (cont’d)
Revenue Cycle
Tower Health’s Revenue Cycle operational foundation allowed the organization to meet the challenges presented during 2020. The revenue cycle components of the CMP markets have stabilized since the implementation of Epic in August 2019 with KPIs being at or better than target levels. Revenues continue to increase since the pandemic lows of April and are above pre-pandemic levels on a consolidated basis.
As we continue to manage through the COVID-19 crisis, Revenue Cycle management continues to aggressively pursue outstanding claim resolution and reduce denials from their major commercial payors. Executive level discussions are held on a regular basis to expedite the payment of claims and ensure additional reimbursement opportunities are realized for COVID -19 diagnosed patients and for Telemedicine services.
Additional technology has been implemented to assist consumers and patients with understanding their liability for healthcare services. The implementation of self-service out of pocket estimates will help meet the new CMS price transparency regulations. The implementation of the Tower Epic system at St Christopher’s Children’s Hospital targeted for February of 2021 will allow for further consolidation and efficiencies within the Revenue Cycle.
The consolidation of systems and operations across Tower Health is allowing Revenue Cycle Operations to increase efficiencies and reduce costs as part of the Transformational Excellence program. The implementation of these initiatives is projected to increase revenues or reduce cost by more than $35 million annually.
CARES Act Relief Funds
As of September 30, 2020, Tower Health has received a total $143 million in grants from several phases of the CARES Act stimulus bill, which have been recognized as other operating revenue. Additionally, deferral of the FICA payroll tax provides $25 million in reduced cash payments. Tower anticipates that it will also benefit from the suspension of Medicare sequestration, the delay of Disproportionate Share Hospital payments reductions for hospitals and the 20% add-on to the DRG payment for inpatients with COVID-19.
Tower HealthConsolidated Statement of Cash Flow
For The Three Month Period Ending September 30, 2020
Cash flows from operating activities and gains:Change in net assets (16,074,000)Adjustments to reconcile change in net assets to netcash provided by operating activities and gains:
Change in unrealized gain on investments (19,092,000)Change in pension liability (11,745,000)Change in deferred revenue 19,233,000Amortization of bond discount 129,000Amortization of bond premium (1,692,000)Depreciation 28,965,000ROU asset amortization 818,000Change in Operating lease liabilities 31,000Realized gains on investments (175,000)Equity in (income) loss of affiliate 3,052,000HHS Stimulus (45,532,000)Restricted contributions (840,000)Change in cash due to changes in operating assets & liabilities:
Receivables from patients and others (16,405,000)Inventories 3,660,000Prepaid expenses and other current assets 4,094,000Deferred Compensation 828,000Goodwill 18,000Other assets 7,109,000Long term debt 1,000Third-party settlements 3,216,000Accounts payable and other liabilities 15,416,000Accrued vacation (1,693,000)Self-insurance cost 1,054,000
Net cash provided (used) by operating activities and gains (25,624,000)$
Cash flows from investing activities:Acquisition of property, plant and equipment (17,295,000)Distribution to/from equity investees 663,000Investment in equity investees (1,000)Sales from assets whose use is limited 2,114,000Purchases from assets whose use is limited (4,673,000)
Net cash provided (used) by investing activities (19,192,000)$
Cash flows from financing activities:Restricted contributions and investment income received 840,000HHS Stimulus 45,532,000Repayments of line of credit (25,005,000)Payments of finance leases 2,051,000
Net cash provided (used) in financing activities 23,418,000$
Net change in cash and cash equivalents (21,398,000)$
Cash and cash equivalents at beginning of year 356,892,000$
Cash and cash equivalents at end of year 335,494,000$
Tower Health
Historical Utilization of Services
For Fiscal Years 2019 through 2021 YTD
FY 2019* FY 2020FY2021 YTD
Consolidated
Beds in Service:
Adults & Critical Care 1,109 1,010 1,010
Obstetrics/Gynecology 60 91 91
NICU 30 34 34
Pediatrics 19 19 19
Skilled Nursing 50 50 50
Acute Rehab 76 76 76
Psych 152 152 152
Subtotal 1,496 1,432 1,432
Newborn 73 73 73
Total 1,569 1,505 1,505
Admissions:
Medical/Surgical 51,879 51,939 13,061
Obstetrics/Gynecology 4,910 4,993 1,222
NICU 417 282 60
Pediatrics 1,368 1,379 263
Skilled Nursing 1,197 1,075 281
Acute Rehab 1,548 1,554 419
Psych 3,652 2,867 551
Subtotal 64,971 64,089 15,857
Newborn 4,200 4,319 1,080
Total 69,171 68,408 16,937
Patient Days:
Medical/Surgical 224,775 233,151 60,502
Obstetrics/Gynecology 12,875 12,696 3,067
NICU 9,111 8,889 1,751
Pediatrics 2,569 2,578 450
Skilled Nursing 16,711 16,917 4,441
Acute Rehab 20,931 22,021 6,373
Psych 42,582 32,366 7,035
Subtotal 329,554 328,618 83,619
Newborn 8,752 8,710 2,085
Total 338,306 337,328 85,704
Acuity:
Case Mix Index 1.43 1.43 1.43
* Prior to FY20, the CMP Hospitals did not segregate beds among Med/Surg, OBGYN and NICU, updated in FY20.
Medical/Surgical includes Adult and Critical Care
FY 2019* FY 2020FY2021 YTD
Consolidated
Length of Stay:
Medical/Surgical 4.33 4.49 4.63
Obstetrics/Gynecology 2.62 2.54 2.51
NICU 21.85 31.52 29.18
Pediatrics 1.88 1.87 1.71
Skilled Nursing 13.96 15.74 15.80
Acute Rehab 13.52 14.17 15.21
Psych 11.66 11.29 12.77
Total 5.07 5.13 5.27
Newborn 2.08 2.02 1.93
Occupancy Rates:
Medical/Surgical 55.5% 59.5% 65.1%
Obstetrics/Gynecology 58.8% 34.0% 36.6%
NICU 83.2% 71.4% 56.0%
Pediatrics 37.0% 37.1% 25.7%
Skilled Nursing 91.6% 92.4% 96.5%
Acute Rehab 75.5% 79.2% 91.1%
Psych 76.8% 58.2% 50.3%
Total 60.4% 59.7% 63.5%
Newborn 32.8% 32.6% 31.0%
* Prior to FY20, the CMP Hospitals did not segregate beds among Med/Surg, OBGYN and NICU, updated in FY20.
Medical/Surgical includes Adult and Critical Care
FY 2019* FY 2020FY2021 YTD
Consolidated
Surgeries:
IP 14,306 12,616 3,476
OP 23,595 18,542 5,537
Total 37,901 31,158 9,013
Emergency Visits:
IP 48,736 50,602 12,558
OP 229,031 236,667 51,438
Total 277,767 287,269 63,996
OP Registrations: 1,304,467 1,388,777 154,508
Physician Vists: 1,728,810 1,871,449 716,374
Urgent Care Visits: 108,072 159,947 42,071
Telehealth** N/A 16,757 26,030
** Telehealth visits began to be collected beginning in June 2020.
Tower Health
Historical Utilization of Services by Hospital
########
Three months ending June 30, 2020 (Q4 FY 2020) and
three months ending September 30, 2020 (Q1 FY 2021)
Q1 FY 2021 vs.
Q4 FY 2020
Q4 FY 2020 Q1 FY 2021 Variance %
Reading 7,828 9,500
Brandywine 1,240 1,403
Chestnut Hill 1,498 1,645
Jennersville 514 593
Phoenixville 1,612 1,756
Pottstown 1,793 2,018
St Christopher's 682 974
Total 15,167 17,889 17.9%
Q4 FY 2020 Q1 FY 2021
Reading 1,281 1,837
Brandywine 154 179
Chestnut Hill 204 331
Jennersville 110 133
Phoenixville 244 301
Pottstown 257 376
St Christopher's 187 319
Total 2,437 3,476 42.6%
Q4 FY 2020 Q1 FY 2021
Reading 846 1,477
Brandywine 183 293
Chestnut Hill 216 363
Jennersville 230 350
Phoenixville 618 1,278
Pottstown 340 654
St Christopher's 702 1,122
Total 3,135 5,537 76.6%
Admissions
IP Surg
OP Surg
Q1 FY 2021 vs.
Q4 FY 2020
Q4 FY 2020 Q1 FY 2021 Variance %
Reading 5,024 6,002
Brandywine 1,080 1,198
Chestnut Hill 1,404 1,421
Jennersville 498 553
Phoenixville 1,062 1,098
Pottstown 1,491 1,721
St Christopher's 409 565
Total 10,559 12,558 18.9%
Q4 FY 2020 Q1 FY 2021
Reading 14,294 19,543
Brandywine 3,373 4,351
Chestnut Hill 5,112 6,845
Jennersville 2,241 2,741
Phoenixville 2,646 3,811
Pottstown 4,659 6,218
St Christopher's 5,106 7,929
Total 37,431 51,438 37.4%
Q4 FY 2020 Q1 FY 2021
Reading 54,027 82,004
Brandywine 6,041 9,091
Chestnut Hill 6,059 13,506
Jennersville 3,224 5,844
Phoenixville 8,768 16,149
Pottstown 9,295 15,189
St Christopher's 6,514 12,725
Total 93,928 154,508 64.5%
OP ER
OP Registrations
IP ER
TOWER HEALTH
NET REVENUE BY PAYOR CATEGORY
1Q YTD Annual Annual
FY 2021 FY2020 FY2019
Category
Medicare Including Mgd MCR 33% 34% 30%
Medicaid Including Mgd MCD 10% 15% 12%
Blue Cross 29% 26% 33%
Non-Blue Commercial 23% 18% 19%
Other & Self Pay 5% 7% 6%
Total 100% 100% 100%
* Reading and CMP Hospitals only Excluding St. Chris
St Christopher's 1Q YTD Annualized
FY 2021 FY2020*
Category
Medicare Including Mgd MCR 1% 1%
Medicaid Including Mgd MCD 81% 83%
Blue Cross 0% 0%
Non-Blue Commercial 17% 14%
Other & Self Pay 1% 2%
Total 100% 100%
*FY 2020 effective 12/15/2019-6/30/2020