Quorum Health seeks to amend loan to ‘alleviate’ going concern issues

By Susanna Moon

Chicago, March 29 – Quorum Health Corp. said it is working with lenders to amend provisions of its senior credit facility, which has delayed filing of its annual report with the Securities and Exchange Commission.

The proposed amendment is related to the company’s adoption of FASB accounting standards update that requires the company “to evaluate if there may be conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern,” according to an earnings release for the three months and year ended Dec. 31, 2016.

As a result, Quorum said it was required to review its ability to comply with the secured net leverage ratio under its senior credit facility for one year after the issue of its financial statements for the year ended Dec. 31, 2016.

Quorum said that if it can negotiate the loan amendment by the time of the 10-K filing, it can “alleviate any substantial doubt” about any going concern issues.

The company said it was in compliance with its financial covenants as of the year-end, but the new standard requires the company “to base its evaluation ... on results and events considered ‘probable’ of occurring considering historical results, implemented plans and executed agreements as of the date the company issues its 2016 financial statements.”

The amendments were proposed given the following: the company’s historical operating results; delays in the approval of the California Department of Health Care Services’ HQAF program for the 2017 to 2019 program period as the company cannot recognize any earned revenues until CMS approval of the program has been issued; and the amount of net operating losses from hospitals the company intends to divest.

The company plans to amend the loan provisions “to provide greater confidence in the company’s ability to comply with the secured net leverage ratio for the one-year period following the issuance of its 2016 financial statements.”

Quorum Health is a Brentwood, Tenn.-based operator and manager of general acute care hospitals and outpatient services.

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