Newly merged Advocate-Aurora sees 20% drop in operating income


https://www.healthcaredive.com/news/newly-merged-advocate-aurora-sees-20-drop-in-operating-income/532082/

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Dive Brief:

  • After finalizing its merger in April, Downers Grove, Illinois-based Advocate Aurora Health released a financial report on the combined company’s year-over-year performance showing a 20% drop in operating income to $220 million for the first six months of the year. The decline is partly due to $34 million in costs related to both the merger and implementation of a new EHR.
  • Total revenue increased 3% to nearly $6 billion for the first six months of the year, while revenue increased 3.5% to about $3 billion for the quarter. Net patient service revenue grew across most service lines, excluding inpatient volumes during the quarter, according to the financial statement.
  • While revenue climbed, so did expenses. The 27-hospital system increased its spending on salaries and wages, supplies and purchased services, and contracted medical services. Total expenses grew 4% to nearly $2.87 billion during the three months ended June 30, and increased 3.5% to $5.68 billion during the first six months of the year.

Dive Insight:

In line with industry trends, inpatient volumes for what is now the 10th-largest nonprofit health system in U.S. either slightly declined or remained flat during the reporting periods. 

About 85,000 patients were discharged from Advocate Aurora during the first six months of the year while more than 3 million patients during that time were seen either during a traditional doctor’s visit or through another outpatient setting. The system’s home care unit saw the largest increases during both reporting periods. 

Meanwhile, the company is not alone in its struggles to rein in EHR rollout costs. The University of Texas MD Anderson Cancer Center in Houston and Partners HealthCare in Boston have all experienced those costs weighing down financial performance, according to a previous report from Becker’s.

The financial report of the combined companies marks a milestone in Advocate’s quest for a partner to increase its scale. The system set its sights on Aurora after it had long tried to acquire NorthShore University Health System, a deal Advocate later dropped after pushback from antitrust regulators worried about price increases.

Analysts don’t expect the frenzied pace of M&A in the healthcare sector to slow down any time soon. The Advocate-Aurora deal was the largest regional transaction, Kaufman Hall reported, amid a year that turned out blockbuster deals threatening to shake up the status quo. 

As patients seek care in lower-acuity settings and as payers and providers team up to transform access to the industry, hospitals have eyed mergers to increase scale and offerings to attract more patients.

The consolidated financial statement details the results of the quarter ended June 30 and the first six months of the year.

 

 

 

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