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Financial updates from 16 health systems

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The health systems listed below recently released financial results for the quarter ended March 31.

1. Livonia, Mich.-based Trinity Health had $15.13 billion in revenue for the nine months ended March 31, up from $15.12 billion in the same period last year. It reported operating income of $139.7 million in the first nine months of fiscal year 2022, down 79 percent from operating income of $653.9 million in the same period a year earlier.

2. Rochester, Minn.-based Mayo Clinic recorded revenue of $3.9 billion for the three months ended March 31, representing about a 7 percent increase compared to the same period one year prior. Mayo Clinic ended the first quarter of this year with an operating gain of $142 million. In the same quarter last year, Mayo posted operating income of $243 million. 

3. Advocate Aurora Health, which has dual headquarters in Milwaukee and Downers Grove, Ill., recorded operating revenue of $3.6 billion in the first quarter of 2022. This represents a 9 percent increase over the comparable period in 2021, in which Advocate Aurora had $3.3 billion in revenue. Advocate Aurora ended the period with an operating income of $2.5 million. In the same period in 2021, Advocate Aurora recorded an operating income of $51 million. 

4. Chicago-based CommonSpirit Health saw revenues decline 6.6 percent year over year to $8.3 billion in the third quarter of fiscal year 2022, which ended March 31. CommonSpirit recorded an operating loss of $591 million in the three-month period ended March 31, compared to operating income of $539 million in the same period a year earlier. 

5. Renton, Wash.-based Providence saw its operating revenue hit $6.3 billion for the three months ended March 31. In the same quarter one year prior, Providence recorded operating revenue of $6.4 billion. It recorded an operating loss of $510.2 million in the first quarter of 2022, compared to $221.9 million from the same quarter a year prior.

6. Boston-based Mass General Brigham recorded operating revenue of $4.04 billion in the second quarter of fiscal year 2022, up from the $4.02 billion recorded in the same period one year prior. Mass General Brigham posted an operating loss of $193.2 million. In the same period one year prior, Mass General Brigham recorded an operating gain of $250.2 million.

7. Johnson City, Tenn.-based Ballad Health‘s total revenue reached $564.8 million in the third quarter of fiscal year 2022, a slight increase from the same period last year at $558.9 million. It reported an operating loss of $37.3 million for the three months ended March 31, compared to an operating income of $16 million in the same period last year.

8. Altamonte Springs, Fla.-based AdventHealth saw its revenue increase to $3.7 billion for the three months ended March 31, up nearly 8 percent from the same period last year. AdventHealth ended the first quarter of 2022 with an operating loss of $46.8 million. In the same quarter of 2021, AdventHealth recorded an operating income of $179.1 million. 

9. Oakland, Calif.-based Kaiser Permanente reported total operating revenue of $24.2 billion for the three months ended March 31, up from $23.2 billion the year prior. Kaiser recorded an operating loss of $72 million. In the same quarter last year, Kaiser recorded an operating income of $1 billion.

10. For the three months ended March 31, Sacramento, Calif.-based Sutter Health recorded revenue of $3.6 billion, up 3.7 percent from $3.4 billion recorded in the same period one year prior. Sutter Health ended the period with a $95 million operating gain. In the first quarter of 2021, Sutter had an operating loss of $49 million.

11. St. Louis-based Ascension reported operating revenue of $6.7 billion in the first three months of this year, up from $6.6 billion in the same period of 2021. Ascension ended the most recent quarter with an operating loss of $671.1 million, compared to an operating loss of $16.7 million in the same period last year.

12. Indianapolis-based Indiana University Health System had $1.93 billion in revenue for the three months ended March 31, a 2.9 percent increase year over year from $1.87 billion. IU Health posted an operating loss of $29.8 million for the first quarter of 2022, compared to an operating income of $192.7 million last year.

13. Franklin, Tenn.-based Community Health Systems had $3.1 billion in net operating revenue for the first quarter of 2022, a 3.3 percent increase from the $3 billion reported for the same period last year. The system posted a 17.2 percent decrease in its operating income, to $270 million for the three months ended March 31, compared to $326 million for the same period last year.

14. King of Prussia, Pa.-based Universal Health Services had a 9.3 percent increase in revenue year over year for the first quarter of 2022. Net revenue was $3.3 billion for the three months ended March 31, up from a little over $3 billion in the same period of 2021. UHS’ operating income fell by 21.2 percent year over year for the first quarter of 2022 to $232.9 million, compared to $295.7 million for the same period last year.

15. Nashville, Tenn.-based HCA Healthcare reported revenues of $15 billion in the first quarter of this year, up from $14 billion in the same period of 2021. HCA’s net income in the first quarter of 2022 totaled $1.3 billion, down from $1.4 billion in the same quarter a year earlier.

16. Dallas-based Tenet Healthcare posted net revenue of $4.8 billion in the quarter ended March 31, down 0.8 percent from the same period last year. Tenet recorded an operating income of $648 million in the first quarter of 2022. In the same period last year, Tenet’s operating income was $520 million.

The 18 health systems Walmart sends its employees to for care in 2022

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https://www.beckershospitalreview.com/strategy/the-18-health-systems-walmart-sends-its-employees-to-for-care-in-2022.html?origin=PayerE&utm_source=PayerE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

In an effort to rein in healthcare costs for its employees, Walmart sends them directly to health systems that demonstrate high-quality care outcomes, otherwise known as Centers of Excellence.

Through the COE program, Walmart will cover the travel and treatment costs for employees seeking a range of services, but only with providers the company is contracted with. Walmart then reimburses with bundled payments negotiated with the providers.

To determine which providers get access to its 1.6 million employees, Walmart starts by examining health systems. Lisa Woods, vice president of physical and emotional well-being at Walmart, and her team analyze public data, distribute requests for information and conduct detailed on-site visits.

Below are the 18 health systems or campuses to which Walmart will refer patients for defined episodes of care in 2022. (See how COE participants have evolved since 2019 or 2021.)

Cardiac

Cleveland Clinic 

Geisinger Medical Center (Danville, Pa.)

Virginia Mason Medical Center (Seattle)

Weight loss surgery

Emory University Hospital (Atlanta)

Geisinger Medical Center (Danville, Pa.)

Intermountain Healthcare (Salt Lake City)

Northeast Baptist Hospital (San Antonio)

Northwest Medical Center (Springdale, Ark.)

Ochsner Medical Center (New Orleans)

Scripps Mercy Hospital (San Diego)

University Hospital (Cleveland)

Spine surgery

Emory University Hospital (Atlanta)

Geisinger Medical Center (Danville, Pa.)

Carolina NeuroSurgery & Spine Associates (Charlotte, N.C.)

Mercy Hospital Springfield (Mo.)

Mayo Clinic Arizona (Phoenix)

Mayo Clinic Florida (Jacksonville)

Mayo Clinic Minnesota (Rochester)

Memorial Hermann-Texas Medical Center (Houston)

Ochsner Medical Center (New Orleans)

Virginia Mason Medical Center (Seattle)

Breast, lung, colorectal, prostate

or blood cancer

Mayo Clinic Arizona (Phoenix)

Mayo Clinic Florida (Jacksonville)

Mayo Clinic Minnesota (Rochester)

Hip and knee replacements

Emory University Hospital (Atlanta)

Geisinger Medical Center (Danville, Pa.)

Johns Hopkins Bayview Medical Center (Baltimore)

Kaiser Permanente Irvine (Calif.) Medical Center

Mayo Clinic Florida (Jacksonville)

Mayo Clinic Minnesota (Rochester)

Mercy Hospital Springfield (Mo.)

Northeast Baptist Hospital (San Antonio)

Ochsner Medical Center (New Orleans)

Scripps Mercy Hospital (San Diego)

University Hospital (Cleveland)

Virginia Mason Medical Center (Seattle)

Organ and tissue transplants

(except cornea and intestinal)

Mayo Clinic Arizona (Phoenix)

Mayo Clinic Florida (Jacksonville)

Mayo Clinic Minnesota (Rochester)

Massachusetts hospitals to spotlight payers’ record pandemic profits

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The Massachusetts Health and Hospital Association is planning to release its semiannual health plan performance report next month and will focus on payers’ finances and enrollment in 2021. 

In a May 23 newsletter, the association highlights the 22 percent increase in payers’ net worth during the COVID-19 pandemic, which totals $6.1 billion for all plans in the state. The newsletter also points to the combined $1.2 billion profit made in 2020 and 2021, which exceeds the previous five years combined.

The newsletter does point to the important role insurers played during the pandemic, including providing coverage of medical care, new therapies, vaccinations and COVID-19 testing. Under federal law, payers also provided rebates to premium payers as healthcare utilization decreased significantly. Some payers independently provided financial support to stabilize providers and used their resources to support the pandemic response.

“Despite these new expenses and efforts related to the COVID-19 emergency, health insurance company profits were substantially higher than at any point in recent history given the overwhelming effect of decreased medical utilization,” the newsletter said.

The association also criticized the decrease in claims payouts during the pandemic, arguing surplus revenue should have been used to increase payouts and not increase profits. 

The hospital group stated that four specific payers, Harvard Pilgrim Health Care, UnitedHealthcare of New England, Tufts Associated HMO and HMO Blue from BCBS Massachusetts have risk-based capital ratios that approach or exceed 600 percent.

The Trend of Health System Mergers Continues

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Click to access Industry_Insights_5.24.22.pdf

While healthcare is delivered locally, the business of healthcare
is regional, and the regions are only getting bigger. Hospital
and health system mergers alike have continued to shift from
local to regional, and the recently announced merger between Advocate Aurora
Health and Atrium Health clearly highlights that the regions are only getting
bigger.


Advocate Aurora, with a presence in Illinois and Wisconsin, and Atrium Health,
with a presence in North Carolina, South Carolina, Georgia, and Alabama, will
combine to create a $27 billion health system that will span six states and make it
one of the leading healthcare delivery systems in the country. The combined
organization, which will transition to a new brand, Advocate Health, will operate
67 hospitals and over 1,000 sites of care, employ nearly 150,000 teammates, and
serve 5.5 million patients. Together, Advocate Health will become the 6th largest
system in the country behind Kaiser Permanente, HCA Healthcare, CommonSpirit
Health, Ascension, and Providence.


We have seen a number of large health systems come together recently,
including Intermountain Healthcare + SCL Health to create a $15 billion revenue
system, Spectrum Health + Beaumont ($14 billion), NorthShore University Health
System + Edward-Elmhurst Healthcare ($5 billion), LifePoint Health + Kindred
Healthcare ($14 billion), and Jefferson Health + Einstein Healthcare Network ($8
billion).


The exact reasoning for each merger differs slightly, but one of the common
threads across all is scale. But not scale in the traditional M&A sense. Rather,
scale in covered lives; scale in physician infrastructure and alignment; scale in
clinical and operational capabilities; scale in technology, innovation, and
partnerships with non-traditional players; scale for capital access; and scale for
insurance risk to compete in a value-based world. It is no longer the strong
acquiring the weak. Rather, strong players are coming together to gain scale to
face the headwinds in a unified manner.

For Advocate Aurora and Atrium, coming together is about leveraging their combined clinical excellence,
advancing data analytics capabilities and digital consumer infrastructure, improving affordability, driving health equity, creating a next-generation workforce, research, and environmental sustainability. Together, they have pledged $2 billion to disrupt the root causes of health inequities across underserved communities and create more than 20,000 new jobs.


Both Advocate Aurora and Atrium are no strangers to mergers. Advocate and Aurora came together in 2018, and prior to that Advocate was intending to merge with NorthShore before being blocked due to anti-trust. Atrium has grown over the years, merging with systems such as Navicent Health in Georgia in 2018, Wake Forest Baptist Health in North Carolina 2020, and Floyd Health System in Georgia in 2021. In the newly proposed merger, Advocate Aurora and Atrium are coming together via a joint operating arrangement where each entity will be responsible for their own liabilities and maintain ownership of their respective assets but operate together under the new parent entity and board. This may allow the combined entity more flexibility in local decision-making. The current CEOs, Jim Skogsbergh and Eugene Woods will serve as co-CEOs for the first 18 months, at which point Skogsbergh will retire, and Woods will take over as the sole CEO.


Mergers can come in various shapes and structures, but the driving forces behind consolidation are not unique. With the need to compete in value-based care, adequately manage risk, gain scale across covered lives, physicians, and points of access, successfully deliver affordable high-quality care, and the need to deal with the vertical and horizontal consolidation of the large-scale payers, the markets that health systems operate in must be large enough to be effective and relevant. We fully expect to see more of these larger scale health system mergers in the near term.


The physical delivery of healthcare is local, but, again, the business of healthcare is not; it is regional, and the regions are only getting bigger.

The US Healthcare Market Debate, Explained Through Economics

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The US Healthcare Market Debate, Explained Through Economics

Everyone agrees that the US healthcare system is not working so great. Compared to the rest of the world, our healthcare is extremely expensive and yet we suffer worse health by many measures. And we can’t seem to agree on what’s to blame, or what we should do about it. Do we have too much, or not enough, competition? Should the government intervene in health care markets more or less? 

Basic economics can help us better understand what’s happening.

As with any exchange of goods and services, the standard competitive market model has the familiar upward sloping supply curve and downward sloping demand curve, illustrating that when prices are higher, demand decreases and supply increases as sellers are incentivized to produce more of that good or service at its higher price. Sellers and buyers arrive at what quantity to produce and consume and at what price based on where these two lines intersect, called the equilibrium. Both buyer and seller are happy with the deal they’ve struck!

But not every market works this way. There are actually standards that need to be met in order for a market to fit this model and for it to work efficiently for both the buyer and seller. 

First, there must exist multiple sellers competing to sell the same goods or services and new sellers must be able to easily enter the market.

There must be a sufficient open exchange of information between buyer and seller about price, availability, and value of a service or good.

And buyers must make, or be in a position to make, rational decisions using the information they possess about the market.

Healthcare does not meet these standards and when these standards are not met, the equilibrium cannot be reached or accurately known. Any price and quantity that falls outside of the equilibrium is considered a market failure. Using only this model, we can see how healthcare’s market failures contribute to high prices. 

To start, it’s true that healthcare is failing the market standards when it comes to competition. The number of sellers in the market is decreasing due to both an increase in barriers to entry and due to consolidation, including hospital mergers. This causes an imbalance in power of the seller over the buyer that can begin to reflect what economists call monopolistic competition where sellers can charge a price above the perfect competition equilibrium. In the extreme, when there is only one seller, the market is a monopoly.  

So then, don’t we just need more competition? Unfortunately, a lack of competition isn’t the only reason that healthcare fails the market standards.

Another failure is that consumers in healthcare, patients, do not have all the information that providers, like doctors and hospitals, do. This is known as asymmetric information. Patients often have no idea before getting care how much it will cost, what the prices available to them elsewhere are, or what the quality will be. When consumers are in the dark about these basic features, the true demand and supply will be different than the model. The true demand may be lower if patients knew ahead of time how much it cost or how much less valuable the service is compared to how it is promoted. This means prices can be set higher than they likely would be if the true demand was known.

Even if patients had full information, they are not always in a position to act as rational consumers. A patient’s decision may be influenced by their concern for their health, or their ability to think rationally may itself be affected by their condition. 

So, as you can see, the problem is that a lack of competition only accounts for part of the reason why healthcare doesn’t meet the market standards. No matter how much the government either steps back to allow for more competition or invests to foster competition, the market will never fix ALL of these failures on its own. Healthcare is not and can never be a free market. It simply does not fit this model.

In 1963, economist and later Nobel prize winner, Kenneth Arrow, warned us about this looming healthcare crisis. He explains that “If the actual market differs significantly from the competitive model […] coordination of purchases and sales must take place”

That coordination he is referring to is government intervention.

Dr. Mike Chernew, Health Economist and Professor of Health Policy at Harvard Medical School agrees…“an unregulated health care market is unlikely to lead to desired outcomes.” 

In reality, health care always has, and always will, involve a combination of both government intervention and market forces to control prices and increase quality. The debate isn’t really whether or not the government should intervene, but by how much and in what way.