St. Louis-based Ascension reported higher expenses in the 12 months ended June 30 and closed out the year with a loss, according to recently released financial documents.
The 144-hospital system reported operating revenue of $27.98 billion in the year ended June 30, up from $27.24 billion a year earlier.
Ascension’s operating expenses climbed to $28.77 billion in the 12 months ended June 30, up from $26.69 billion last year. The increase was attributed to several factors, including higher salaries, wages and benefits due to staffing challenges and increased use of contract and premium labor.
Ascension ended the most recent fiscal year with an operating loss of $879.2 million, compared to an operating income of $676.3 million a year earlier.
After factoring in nonoperating items, Ascension reported a net loss of $1.8 billion for the 12 months ended June 30. A year earlier, the health system posted net income of $5.7 billion.
Ascension is facing many of the same financial pressures as other health systems across the U.S. More than half of hospitals — 53 percent — are projected to have negative margins for the rest of the year.
Here are 14 health systems with strong operational metrics and solid financial positions, according to reports from Fitch Ratings and Moody’s Investors Service.
1. Advocate Aurora Health has an “AA” rating and stable outlook with Fitch. The health system, dually headquartered in Milwaukee and Downers Grove, Ill., has a strong financial profile and a leading market position over a broad service area in Illinois and Wisconsin, Fitch said. The health system’s fundamental operating platform is strong, the credit rating agency said.
2. AnMed Health has an “AA-” rating and stable outlook with Fitch. The Anderson, S.C.-based system has a leading market share in most service lines, strong operating performance and very solid EBITDA margins, Fitch said.
3. Banner Health has an “AA-” rating and stable outlook with Fitch. The Phoenix-based health system’s core hospital delivery system and growth of its insurance division combine to make it a successful highly integrated delivery system, Fitch said. The credit rating agency said it expects Banner to maintain operating EBITDA margins of about 8 percent on an annual basis, reflecting the growing revenues from the system’s insurance division and large employed physician base.
4. Bon Secours Mercy Health has an “AA-” rating and stable outlook with Fitch. The Cincinnati-based health system has a broad geographic footprint as one of the five largest Catholic health systems in the U.S., a good payer mix and a leading or near leading market share in eight of its eleven markets in the U.S., Fitch said.
5. Lincoln, Neb.-based Bryan Health has an “AA-” rating and stable outlook with Fitch. The health system has a leading and growing market position, very strong cash flow and a strong financial position, Fitch said. The credit rating agency said Bryan Health has been resilient through the COVID-19 pandemic and is well-positioned to accommodate additional strategic investments.
6. Franciscan Alliance has an “AA” rating and stable outlook with Fitch. The Mishawaka, Ind.-based health system has a very strong cash position and maintains leading market shares in seven of its nine defined primary service areas, Fitch said. The health system benefits from a good payer mix, the credit rating agency said.
7. Gundersen Health System has an “AA-” rating and stable outlook with Fitch. The La Crosse, Wis.-based health system has strong balance sheet metrics and a leading market position and expanding operating platform in its service area, Fitch said. The credit rating agency expects the health system to return to strong operating performance as it emerges from disruption related to the COVID-19 pandemic.
8. Hackensack Meridian Health has an “AA-” rating and stable outlook with Fitch. The Edison, N.J.-based health system has shown consistent year-over-year increases in market share and has a solid liquidity position, Fitch said.
9. Falls Church, Va.-based Inova Health System has an “Aa2” rating and stable outlook with Moody’s. The health system has a consistently strong operating cash flow margin and ample balance sheet resources, Moody’s said. Inova’s financial excellence will remain undergirded by its favorable regulatory and economic environment, the credit rating agency said.
10. Salt Lake City-based Intermountain Healthcare has an “Aa1” rating and stable outlook with Moody’s. The health system has exceptional credit quality, which will continue to benefit from its leading market position in Utah, Moody’s said. The credit rating agency said the health system’s merger with Broomfield, Colo.-based SCL Health will give Intermountain greater geographic reach.
11. Omaha-based Nebraska Medicine has an “AA-” rating and stable outlook with Fitch. The health system has a strong market position and is the only public academic provider in Nebraska with high acuity services, Fitch said. The health system continues to generate positive operating cash flow levels, and it has modest flexibility to absorb additional debt, according to the credit rating agency.
12. Fort Wayne, Ind.-based Parkview Health has an “Aa3” rating and stable outlook with Moody’s. The health system has a leading market position with expansive tertiary and quaternary clinical services in northeastern Indiana and northwestern Ohio, Moody’s said. The credit rating agency said the stable outlook reflects management’s ability to generate strong operating performance during the pandement and with less favorable reimbursement rates.
13. UnityPoint Health has an “AA-” rating and stable outlook with Fitch. The Des Moines, Iowa-based health system has strong leverage metrics and cash position, Fitch said. The credit rating agency expects the health system’s balance sheet and debt service coverage metrics to remain robust.
14. Yale New Haven (Conn.) Health has an “AA-” rating and stable outlook with Fitch. The health system’s turnaround efforts, brand recognition and market presence will help it return to strong operating results, Fitch said.
Moody’s Investors Service has downgraded MultiCare Health System’s revenue bonds to “A1” from “Aa3,” and revised the health system’s rating outlook to negative from stable.
Moody’s said the downgrade and the revision of the outlook to negative reflect several pressures that weaken the health system’s credit profile, including an unexpected 24 percent increase in debt, a decline in liquidity and significant operating losses through the first six months of fiscal 2022.
“Operations are expected to improve through the second half of fiscal 2022, but nevertheless full year results will remain weak, providing at best thin headroom to MultiCare’s debt service coverage covenant,” Moody’s said.
Moody’s noted that MultiCare, an 11-hospital system based in Tacoma, Wash., will continue to benefit from several strengths, including a large and growing revenue base and strong clinical offerings.
Months of inching performance gains were upended in July as the nation’s hospitals logged “some of the worst margins since the beginning of the COVID-19 pandemic,” Kaufman Hall wrote in its latest industry report.
Decreasing outpatient revenues paired with pricier inpatient stays were chief among the culprits and outpaced minor improvements in expenses, the group wrote in its monthly sector update for July.
What’s more, seven straight months of negative margins “reversed any gains hospitals saw this year” and has the advisory group forecasting a brutal year for the industry.
“July was a disappointing month for hospitals and put 2022 on pace to be the worst financial year hospitals have experienced in a long time,” Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said in a statement. “Over the past few years, hospitals and health systems have been able to offset some financial hardship with federal support, but those funding sources have dried up, and hospitals’ bottom lines remain in the red.”
Kaufman Hall placed its median year-to-date operating margin index at -0.98% through July, compared to the -0.09% from January to June the group had reported during last month’s report. Hospitals’ median percent change in operating margin from June to July was -63.9%, according to the report, and -73.6% from July 2021.
The month’s volume trends hinted at the larger shift toward scheduling procedures for ambulatory settings, Kaufman Hall wrote. For instance, operating room minutes declined 10.3% from June to July and 7.7% year over year, according to the report.
Patients who did come into the hospital tended to be sicker, the firm continued. Average length of stay increased 2% from last month and 3.4% year over year. Patient days increased 2.8% from the previous month but were down 2.6% from the prior year, while adjusted discharges dipped 2.8% from June and 4.2% from July 2021.
These trends came together as a brake check on 2022’s to-date revenue gains. Gross operating revenue fell 3.6% from June but remains up 5.5% year to date. Outpatient revenue was down 4.8% from June and maintains a 7.1% year-to-date increase. Inpatient revenue declined 0.7% from June but is still up 3.6% year to date.
The silver lining in Kaufman Hall’s report were total expenses that, although up 7.6% from July 2021, saw a modest 0.4% decline since June. Those savings came squarely among supply and drug expenses as total labor costs and labor expense per adjusted discharge still grew 0.8% and 3.5%, respectively, since June. Increases in full-time employees per adjusted occupied bed “possibly” suggest increased hiring, the group wrote in the report.
Kaufman Hall acknowledged the “urgency of day-to-day pressures” driving the month’s sudden performance dips but urged hospital leaders to prioritize long-term operational improvements as they work to keep the organization afloat.
“2022 has been, and will likely continue to be, a challenging year for hospitals and health systems, but it would not be prudent to focus on short-term solutions at the expense of long-term planning,” Swanson said. “Hospitals and health systems must think strategically and make investments to strengthen performance toward long-term institutional goals despite the day-to-day financial challenges they experience.”
Kaufman Hall’s monthly reports are based on a sample of more than 900 nationally representative hospitals.
The group isn’t alone in its doom-and-gloom warnings for providers. Fitch Ratings recently wrote that high expenses, jilted volume gains and other challenges are unlikely to resolve before the end of the year. As such, the agency downgraded its outlook for the nonprofit hospital industry from “neutral” to “deteriorating.”
Cleveland Clinic’s revenue was down year over year in the second quarter of this year, and the health system ended the period with a loss, according to financial documents released Aug. 29.
The health system’s revenue totaled $3.1 billion in the three-month period ended June 30, down from $3.2 billion in the same quarter last year.
Cleveland Clinic reported expenses of $3.1 billion in the second quarter of this year, up from $2.7 billion in the same period last year. The system saw expenses rise across all categories, including supplies and salaries, wages and benefits.
“Nationwide labor shortages have created staffing challenges that have resulted in increased overtime costs and premium pay for employed caregivers as well as an increase in the utilization of agency nurses and other temporary personnel to meet the demand of patient activity,” Cleveland Clinic said in an earnings release. “Supplies, pharmaceuticals and other nonlabor expenses have also increased due to recent inflationary trends and supply chain challenges.”
The health system ended the second quarter with an operating loss of $183.5 million, compared to operating income of $339.5 million in the second quarter of 2021.
After factoring in nonoperating losses, Cleveland Clinic posted a net loss of $786.9 million in the second quarter of this year, compared to net income of $904.4 million in the same quarter a year earlier.
Looking at the first six months of this year, Cleveland Clinic reported a net loss of $1.1 billion on revenue of $6.2 billion. In the same period a year earlier, the health system reported net income of $1.3 billion on revenue of $6 billion, according to the financial documents.
Nonoperating losses for Cleveland Clinic were $781.4 million in the first six months of this year, compared to nonoperating gains of $853.5 million in the same period last year. The decrease was primarily due to lower investment returns in the first half of 2022.
UPMC reported higher revenue in the first half of this year than in the same period of 2021, but the Pittsburgh-based health system’s operating income declined year over year, according to financial documents released Aug. 23.
UPMC reported revenue of $12.5 billion in the first six months of this year, up from $12.2 billion in the same period of 2021.
Expenses also increased year over year. UPMC reported operating expenses of $12.4 billion in the first half of this year, up from $11.6 billion a year earlier. Expenses increased across all categories, including supplies and salaries and benefits.
“Throughout 2022, the continued effect of COVID-19, along with conditions in the labor and supply markets have resulted in cost growth in employment, staffing and other operating expenses in excess of revenue growth,” UPMC management wrote in the financial filing.
The health system ended the first half of this year with operating income of $81.9 million, down 86 percent from $604.6 million in the same period last year. UPMC’s operating margin was 0.7 percent for the first half of this year, compared with 5 percent in the same period last year.
UPMC reported a net loss of $844.1 million in the first half of this year, compared to net income of $1.1 billion in the same period of 2021. The system’s loss from investing and financing activities totaled $865.9 million in the first two quarters of 2022, compared to a gain of $531.1 million in the same period a year earlier.
Following a tight first quarter, Advocate Aurora Health managed to grow its operating margin but still landed negative due to $400 million in investment losses during the quarter ended June 30, according to financial filings.
The 27-hospital nonprofit—which pending regulatory review slated to merge with Atrium Health in one of the year’s biggest hospital transactions—reported a $48.7 million operating income during its second fiscal quarter of 2022 (1.7% margin).
This is up from the $2.5 million (0.3% margin) it scraped out earlier this year but well below the $213.7 million (6.5% margin) of Q2 2021.
Revenues for the quarter increased 1.5% year over year to more than $3.5 billion. While patient service revenue and other revenue both grew by tens of millions, capitation revenue declined slightly due to a shift in overall membership mix and a 6.1% dip in capitated lives, the system wrote in its filing.
Discharge volumes fell 7.7% year over year during the most recent quarter, as did home care visits by 7.6%. The system saw increases compared to the previous year among its observation cases (11.6%), hospital outpatient visits (2.1%) and physician visits (7.1%).
Advocate Aurora’s expenses grew at a faster rate, at 6.7% year over year during the second quarter. The increase was led by a 10.2% jump in salaries, wages and benefits payouts, which the system said was fueled by a blend of higher nurse agency costs, higher merit and premium pay for clinical care and volume-driven demand for more full-time equivalent employees.
The nonprofit saw last year’s investment gains largely upended, recording a $400 million net loss during the quarter compared to the $571.6 million gain of the prior year’s equivalent quarter.
The shortfall dragged Advocate Aurora’s net income to a $347.6 million loss for the quarter. It had logged a $545.6 million gain the previous year.
Looking at six-month numbers, the health system reported $7.1 billion in total revenue and $7 billion in total expenses for an operating income of $51.2 million. Year-to-date investment losses landed at $666 million, bringing the organization to a $600.8 million net loss.
Advocate Aurora was formed in 2018 from the merger of nonprofits Advocate Health Care and Aurora Health Care. It treats 2.6 million unique patients, employs 75,000 people and logged just under $14.1 billion in total revenue across 2021 and a net income of more than $1.8 billion.
Should its merger plans go through, Advocate Aurora and Atrium Health would control 67 hospitals and $27 billion of combined revenues across six states. The deal is anticipated to close before the end of the year, according to the earnings filing.
The system’s latest numbers will come as no surprise in light of similar quarterly reports from Advocate Aurora’s nonprofit contemporaries.
Fitch Ratingswarned last week that these sector-wide challenges are unlikely to vanish during the remainder of the year. As such, the agency has downgraded its outlook for the nonprofit hospital industry from “neutral” to “deteriorating.”
Intermountain Healthcare reported net income of $2.7 billion in the first six months of the year, despite a heavy loss on investments and flagging operating income.
The 46% year-over-year jump in net income for the Utah-based nonprofit was spurred by more than $4 billion in contribution from its merger with SCL Health that closed in April, according to recent financial documents.
Intermountain and SCL entered into a merger agreement to combine their health systems in December. The merger was completed in April, creating a $12 billion system and expanding Intermountain’s reach into Colorado.
In its first financial filing since the affiliation, 33-hospital Intermountain, which also manages hundreds of clinics across seven states, reported revenues of $6.5 billion in the first six months of 2022, up 25% year over year.
Expenses climbed 31% to $5.9 billion, driven primarily by growth in employee compensation and benefits and increasingly pricey supplies.
Net operating income was $285 billion, down 38% year over year.
Intermountain’s inpatient admissions and hospital outpatient visits ticked down 1% and 7% respectively, though its emergency rooms visits climbed 11%. Visits at the system’s non-hospital clinics were also up 11%.
Inpatient surgeries were down 2% while outpatient surgeries were up 4%, suggesting a broader shift away from care being delivered in the hospital setting.
Intermountain’s results mirror those of other large U.S. systems in 2022 so far, as major for-profit chains report lower operating income and admissions. Tight competition for labor amid ongoing workforce shortages has resulted in skyrocketing labor expenses while inflation and supply chain pressures has ratcheted up the cost of hospital supplies needed to provide patient care.
On Tuesday, ratings agency Fitch said its outlook for nonprofit hospitals is “deteriorating” amid elevated expense pressures, along with investment losses.
On Friday, Intermountain named Lydia Jumonville as interim CEO after Marc Harrison announced plans to depart the Salt Lake City-based system for the venture capital firm General Catalyst. Intermountain’s board is conducting a national search for a permanent chief executive, which it hopes to complete by the fall.
Detroit-based Henry Ford Health ended the first half of this year with an operating loss, according to financial documents released Aug. 15.
In the first two quarters of this year, Henry Ford Health reported revenue of $3.41 billion, up from $3.36 billion in the same period a year earlier. Net patient service revenue and healthcare premium revenue were up year over year. The health system attributed the increase in patient service revenue to higher pharmacy and outpatient volume.
After factoring in expenses, which grew 4.4 percent year over year, the health system ended the first six months of this year with an operating loss of $74.77 million and an operating margin of -2.2 percent. Henry Ford Health reported operating income of $19.29 million in the first half of 2021.
Henry Ford Health’s nonoperating loss totaled $272.53 million in the first six months of this year, which was primarily attributed to a significant loss on investments. In the first half of 2021, the health system reported nonoperating income of $134.65 million.
Henry Ford Health closed out the first half of this year with a net loss of $347.98 million, compared to a net income of $153.18 million in the same period of 2021.
Mayo Clinic’s revenue and expenses were higher in the second quarter of this year, according to financial documents released Aug. 18.
Rochester, Minn.-based Mayo Clinic’s revenue totaled $4.03 billion in the second quarter of this year, up from $3.94 billion in the same period a year earlier.
The nonprofit health system’s expenses climbed 11 percent year over year to $3.88 billion in the second quarter of 2022. Mayo Clinic saw expenses increase across all categories, including salaries and benefits.
Mayo Clinic ended the second quarter of this year with operating income of $155 million, down 66 percent from $451 million in the same quarter of 2021.
Mayo Clinic has major campuses in Rochester, Jacksonville, Fla., and Scottsdale and Phoenix, Ariz.