Dignity Health earnings plummet with weak patient volume, reimbursements

Dignity Health, nonprofit San Francisco-based hospital chain, has undergone some significant financial duress over the past year, reported The Sacramento Bee. It's net income for the fiscal year ending June 30 was $132.5 million--a drop of nearly 85 percent.

Dignity, which was previously known as Catholic Healthcare West, blamed the downturn on "lower volume, continued underpayments from government payers, and a weak investment market," it said Friday in statement. The chain operates 30 hospitals in California, Nevada and Arizona.

Investment earnings actually experienced a steeper drop than operating income: It totaled only $73.4 million, down from $717.9 million in the prior year. That is a drop of 90 percent, despite the relatively healthy performance of the U.S. stock markets: The Down Jones Industrial Average and NASDAQ were up about 3 percent between June 2011 and June 2012, respectively, although they rose much more robustly between mid-2010 and mid-2011.

As a result, Fitch Ratings has downgraded Dignity's $3.5 billion in debt from "A+" to "A." According to the ratings service, Dignity's financial performance has been "compressed" since fiscal 2009. "Overall financial metrics lag … and are not expected to improve materially over the near term," Fitch said last week in a statement. It noted that Dignity also plans to grow its operations beyond the western United States, and that it will assume risk in doing so.

For more information:
- read the Sacramento Bee story
- here's the Dignity Health financial statement (.pdf)
- read the Dignity Health announcement
- check out the Fitch statement