Mayo Clinic posts $142M operating gain, bucking national trend

Rochester, Minn.-based Mayo Clinic ended the first quarter of 2022 with an operating gain, unlike many health systems across the U.S. 

In the quarter ended March 31, Mayo Clinic recorded revenue of $3.9 billion, representing about a 7 percent increase compared to the same period one year prior. The health system saw a boost in medical service revenue and grant revenue, according to its financial report released May 19.

Mayo Clinic’s expenses also rose in the first quarter of 2022 to $3.8 billion. In the comparable quarter in 2021, Mayo Clinic’s expenses were $3.4 billion. The health system attributed the 10 percent expense increase to a boost in salaries and wages as well as supply costs. 

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.

The health system also recorded nonoperating losses of $369 million in the first quarter of 2022

Despite losses from nonoperating items, Mayo Clinic ended the quarter with $17.5 billion in net assets, up from $13.2 billion recorded in the same period one year prior.

“The year 2022 begins with new challenges that follow nearly two years of pandemic operations,” Mayo Clinic said in the financial report. “Workforce shortages and corresponding labor cost inflation, persistent supply chain disruptions and shortages, a higher interest rate environment, and capital market volatility have all taken center stage for management attention.”

Trinity Health’s operating income slips 79% as labor costs soar


Higher labor costs put pressure on Trinity Health’s margins in the first nine months of fiscal year 2022, according to financial documents released May 20. 

Livonia, Mich.-based Trinity Health posted revenue of $15.13 billion in the nine months ended March 31, up from $15.12 billion in the same period a year earlier. The health system said net patient service revenue was up 3.3 percent year over year, primarily because of increased volume and payment rates. 

Patient volumes continue to fluctuate with COVID-19 pandemic surge and recovery waves and patient volumes are returning but have yet to return to pre-pandemic levels,” the system said in an earnings release. 

Trinity Health’s operating expenses for the first nine months of fiscal year 2022 increased by 4.8 percent year over year to $15.12 billion. The increase was attributed to a $679.8 million increase in labor costs. Contract labor expenses increased 154.2 percent during the nine-month period. 

Trinity Health 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. Operating income in the first nine months of the current fiscal year included a $128.7 million gain on the sale of Gateway Health Plan. 

After factoring in investments and nonoperating items, Trinity posted net income of $43 million for the first nine months of fiscal year 2022, down from $3.19 billion in the same period a year earlier.

Relief funding helped hospitals stay in the green during COVID-19’s initial barrage, study finds

https://www.fiercehealthcare.com/providers/relief-funding-helped-hospitals-stay-green-during-covid-19s-initial-barrage-researchers

Despite substantial operating margin declines during the first year of COVID-19, U.S. hospitals were able to keep their finances on track thanks to billions in government relief funds, Johns Hopkins researchers wrote in a new study published Friday in JAMA Health Forum.

Per their analysis of Centers for Medicare and Medicaid Services (CMS) Hospital Cost Reports data, researchers found that thousands of hospitals broadly maintained their overall profit margins thanks to a boost in “other nonoperating income,” the category under which hospitals recorded the collective $175 billion in subsidies Congress allocated to support healthcare facilities and clinicians.

This was particularly the case for government, rural and smaller hospitals that typically run on tighter margins, the researchers wrote. Because they, by design, received more targeted relief than other types of hospitals, these facilities were able to record higher overall profit margins in 2020 than in prior years.

“Hospital operations were really hit hard during the pandemic,” Ge Bai, professor in the Bloomberg School’s Department of Health Policy and Management, a professor of accounting at the Johns Hopkins Carey Business School and an author of the study, said in a statement.

“Our study shows that the relief funds provided an important lifeline to keep financially weak hospitals up and running.”

Among the study’s sample of 1,378 hospitals, mean operating margin declined from –1.0% in 2019 to –7.4% in 2020, representing the hit facilities took to their operations prior to the relief funding.

Those hospitals’ mean overall profit margin during the first year of the pandemic was 6.7%, which the researchers wrote was stable in light of the preceding four years and across all ownership types, geographic locations and hospital sizes.

The difference-maker, they wrote, was an increase in other nonoperating income as a share of a hospital’s total revenue. While that mean share was 4.4% in 2019, it jumped to 10.3% in 2020 thanks to the government relief funds.

Additionally, certain types of hospitals with traditionally lower overall profit margins saw significant improvements in 2020. These included government hospitals (3.7% to 7.2%), rural hospitals (1.9% to 7.5%) and hospitals with fewer admissions (3.5% to 6.7%).  

“Hospitals that tend to serve socioeconomically disadvantaged patients and more who are uninsured are the most vulnerable to financial losses,” Yang Wang, a doctoral student in the Bloomberg School’s Department of Health Policy and Management and the study’s first author, said in a statement. “But the extra federal funding helped them stay operational.”

The researchers’ study included hospitals with fiscal years beginning in January whose financial data were compiled and processed as part of RAND Hospital Data, which in turn pulls its data from CMS’ Medicare Cost Reports. The findings persisted among a second sample of 785 hospitals from the database with fiscal years beginning in July.

The government’s distribution of COVID-19 relief funds to providers has faced some critique from healthcare policy researchers, some of whom suggested that the methodology led to funding skewed toward hospitals serving well-insured communities.

Much of the relief set aside for hospitals has since run dry or is on its last legs as of early 2022. With COVID hospitalizations again ticking upward and earlier surges still unaccounted for, industry groups and the Biden administration alike are pushing Congress for more relief support.

Providence’s operating loss hits $510M in Q1

Citing inflation and labor cost pressures, Renton, Wash.-based Providence recorded an operating loss of $510.16 million in the first quarter of 2022, according to financial documents released May 13. In the same quarter one year prior, Providence posted an operating loss of $221.91 million.

In the quarter ended March 31, the 51-hospital health system saw its operating revenue hit $6.29 billion. In the same quarter one year prior, Providence recorded operating revenue of $6.44 billion. 

Providence’s expenses grew about 2 percent year over year to $6.8 billion. In the comparable quarter in 2021, Providence recorded expenses of $6.67 billion. Providence attributed the expense increase to added costs of agency staff, overtime, retention and wage increases, as well as supply cost boosts. 

Providence also said that excluding from the 2021 comparison the assets of Hoag Memorial Hospital Presbyterian in Newport Beach, Calif. — which split from Providence in January — the health system’s expenses grew 9 percent year over year. 

After factoring in nonoperating items, including investment losses of $359 million and a $3.41 billion disaffiliation cost tied to the Hoag Memorial split, Providence recorded a net loss of $4.25 billion in the first quarter of 2022. 

“With the pandemic, the last two years were challenging for many in healthcare. However, 2022 may be the biggest challenge yet,” Providence CFO Greg Hoffman said. “Rising costs due to inflation and the health care labor crisis are putting significant pressure on major U.S. health systems, some of whom have reported significant operating losses this quarter.”

CommonSpirit posts $591M quarterly operating loss

CommonSpirit Health, a 142-hospital system based in Chicago, reported an operating loss for the three months ended March 31, according to financial documents released May 13. 

CommonSpirit, formed through the 2019 merger of San Francisco-based Dignity Health and Englewood, Colo.-based Catholic Health Initiatives, 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. 

The health system also saw expenses rise. Total operating expenses reached nearly $8.9 billion in the three months ended March 31, up from $8.3 billion in the same period a year earlier. Expenses tied to salaries and benefits increased from $4.2 billion in the third quarter of fiscal year 2021 to nearly $4.7 billion in the most recent quarter.

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. 

CommonSpirit closed out the third quarter of fiscal year 2022 with a net loss of $592 million. In the same period of 2021, the health system reported net income of $1.7 billion. 

Looking at the nine-month period ended March 31, CommonSpirit posted a net loss of $205 million on revenue of $25.7 billion. In the same period a year earlier, the system reported net income of $4.4 billion on revenue of $24.8 billion.

Allina Health’s operating income rises by $165M

Minneapolis-based Allina Health posted an operating income of $128.8 million for the year ended Dec. 31, up from the $36.3 million loss in 2020, according to its financial results.

The 10-hospital system saw its net income jump 400.8 percent in 2021 to $381.1 million, compared to $76.1 million the year prior.

Allina’s total revenue increased by 11.3 percent, or $493 million, in 2021 compared to 2020. This was directly related to reduced volumes because of the mandatory shutdown in 2020, Allina said in the report. The system’s total patient revenue reached $4.5 billion in 2021, a 14.5 percent increase from the year before at $3.9 billion.

The health system’s operating expenses rose 7.5 percent for the 12 months months ended Dec. 31 to $4.7 billion, compared to $4.4 billion in 2020.

AdventHealth posts $417.7M loss in Q1

AdventHealth, a 48-hospital system based in Altamonte Springs, Fla., recorded a $417.72 net loss in the first quarter of 2022, driven by both investment and operating losses, according to recently released financial results. 

In the quarter ended March 31, AdventHealth saw its revenue increase to $3.67 billion, up nearly 8 percent from the same period last year. 

Although revenue was up, so were AdventHealth’s expenses. In the first quarter of 2022, AdventHealth saw its expenses grow to $3.72 billion, up from $3.23 billion recorded in the same period in 2021. 

“The increased expense is primarily a result of elevated premium and contract labor costs and wage inflation resulting from workforce shortages,” AdventHealth stated in its financial report. “The system continues to implement workforce stabilization plans to reduce turnover and temporary labor utilization.”

AdventHealth ended the first quarter of 2022 with an operating loss of $46.75 million. In the same quarter of 2021, AdventHealth recorded an operating income of $179.11 million. 

After factoring in nonoperating items, including a $372.16 million investment loss, AdventHealth ended the first quarter of 2022 with a net loss of $417.72 million. In the first quarter of 2021, AdventHealth recorded a $94.78 million net income. 

Hospital labor expenses up 37% from pre-pandemic levels in March

Dive Brief:

  • Hospitals’ labor costs rose by more than a third from pre-pandemic levels by March 2022, according to a report out Wednesday from Kaufman Hall.
  • Heightened temporary and traveling labor costs were a main contributor, with contract labor accounting for 11% of hospitals’ total labor expenses in 2022 compared to 2% in 2019, the report found.
  • Contract nurses’ median hourly wages rose 106% over the period, from $64 an hour to $132 an hour, while employed nurse wages increased 11%, from $35 an hour to $39 an hour, the report found.

Dive Insight:

The new data from Kaufman Hall supports concerns hospital executives expressed while releasing first quarter earnings results, as higher-than expected labor costs spurred some operators, like HCA, to lower their financial full-year guidance.

The ongoing use of contract labor amid shortages driven by heightened turnover was a key factor executives cited for higher costs, and follows the findings from Kaufman Hall’s latest report.

More than a third of nurses surveyed by staffing firm Incredible Health said they plan to leave their current jobs by the end of this year, according to a March report. While burnout is driving them to leave, higher salaries are the top motivating factor for taking other positions, that report found.

Kaufman Hall’s report, which analyzes data from more than 900 hospitals across the country, found hospitals spent $5,494 in labor expenses per adjusted discharge in March compared to $4,009 roughly three years ago.

Costs rose for hospitals in every region, though the South and West experienced the largest increases from pre-pandemic levels as those expenses rose 43% and 42%, respectively.

The West and Northeast/Mid-Atlantic regions saw the highest expenses consistently from 2019 to 2022, according to the report.

“The pandemic made longstanding labor challenges in the healthcare sector much worse, making it far more expensive to care for hospitalized patients over the past two years,” said Erik Swanson, senior vice president of data and analytics at Kaufman Hall.

“Hospitals now face a number of pressures to attract and retain affordable clinical staff, maintain patient safety, deliver quality services and increase their efficiency,” Swanson said.

The report also notes that hospitals are competing with non-hospital employers also pursuing hourly staff, though those companies can pass along wage increases to consumers through higher prices “in a way healthcare organizations cannot,” the report said.

Some hospitals, like HCA Healthcare and Universal Health Services, are looking to raise prices for health plans amid rising nurse salaries, according to reporting from The Wall Street Journal.

Another recent report from group purchasing organization Premier found the CMS underestimated hospital labor spending when making payment adjustments for the 2022 fiscal year, resulting in hospitals receiving only a 2.4% rate increase compared to a 6.5% increase in hospital labor rates.

To match the rates hospitals are now paying staff, an adequate inpatient payment update for fiscal 2023 is needed, that report said.

The CMS proposed its IPPS rule for FY 2023 on April 18 that includes a 3.2% hike to inpatient hospital payments, which provider groups like the American Hospital Association rebuked as “simply unacceptable” considering inflation and rising hospital labor costs.

Ascension posts $884M quarterly loss

St. Louis-based Ascension reported higher expenses in the three months ended March 31 and ended the quarter with a loss, according to financial documents filed April 29. 

The 143-hospital system reported operating revenue of $6.69 billion in the first three months of this year, up from $6.56 billion in the same period of 2021. 

Ascension’s operating expenses climbed to $7.34 billion in the first three months of 2022, up from $6.59 billion in the same period a year earlier. The increase was attributed to several factors, including higher salaries, wages and supply expenses. 

Looking at the first nine months of the current fiscal year, Ascension’s operating expenses increased 8.7 percent year over year. Staffing challenges, increased use of contract labor and overtime spend pushed Ascension’s total salaries, wages and benefits up 10.1 percent year over year in the nine months ended March 31.

Ascension ended the most recent quarter with an operating loss of $671.14 million, compared to an operating loss of $16.71 million in the same period last year. 

After factoring in nonoperating items, Ascension reported a net loss of $884.74 million for the three months ended March 31. A year earlier, the health system posted net income of $957.32 million. For the first nine months ended March 31, Ascension reported net income of $145.21 million, compared to $4.77 billion in the same period a year earlier. 

As of March 31, Ascension had 295 days cash on hand, compared to 336 days as of June 30, 2021.

Kaiser posts net loss of $961M in Q1

https://about.kaiserpermanente.org/our-story/news/announcements/kaiser-foundation-health-plan-and-hospitals-q1-2022-financial-update

Q1 2022 and Q1 2021 financial summary

$ in millions, except %Q1 2022Q1 2021
Total operating revenues$24,197$23,185
Total operating expenses$24,269$22,155
Operating income (loss)($72)$1,030
Operating margin(0.3%)4.4%
Total other income and expense (loss)($889)$1,003
Net income (loss)($961)$2,033
Capital spending$872$906

For the quarter ending March 31, 2022, Kaiser Foundation Health Plan, Inc., Kaiser Foundation Hospitals, and their respective subsidiaries (KFHP/H) reported total operating revenues of $24.2 billion and total operating expenses of $24.3 billion compared to total operating revenues of $23.2 billion and total operating expenses of $22.2 billion in the same period of the prior year. There was an operating loss of $0.07 billion, or (0.3%) of total operating revenues, for the first quarter of the year compared to operating income of $1.0 billion, or 4.4%, in the first quarter of 2021.

During the first quarter of 2022, a surge in COVID-19 cases — the steepest since the start of the pandemic — led to a substantial increase in the demand for related care and testing. COVID-19 expenses drove an additional $1.4 billion in expenses. Those expenses, along with the costs of providing care to our members that was deferred earlier in the pandemic, were the primary drivers of additional expenses. In the first quarter of 2022, Kaiser Permanente cared for more than 688,000 patients with COVID-19, including more than 26,000 hospitalized patients, performed 2.5 million COVID-19 diagnostic tests, supplied 1.3 million COVID-19 home tests, and administered 1.4 million vaccine doses. In addition, like the rest of the industry, Kaiser Permanente experienced significant increases in labor costs during the first quarter of 2022, compared to the same period last year and when compared to year-end 2021.

“I am incredibly proud of the extraordinary people of Kaiser Permanente, who have stepped up time and time again to provide high-quality care and service to our members and communities during unparalleled challenges,” said chair and chief executive officer Greg A. Adams. “While in the first quarter, the ongoing effects of the pandemic strained our workforce, communities, and operations, our operating model, which provides both care and coverage, enabled us to continue providing that care even in the face of an unprecedented omicron surge and industrywide labor shortage. Our underlying operating performance remains solid and aligned with expectations.”

In the category of other income and expense, the quarterly loss totaled $889 million, driven largely by investment losses, compared to $1.0 billion in income in the same period of the prior year. For the quarter, there was a net loss of $961 million compared to net income of $2.0 billion in 2021.

Capital spending

Capital spending in the first quarter totaled $872 million compared to $906 million in the same period of the prior year. During the first 3 months of 2022, Kaiser Permanente opened a new, 220,000-square-foot medical facility in Timonium, Maryland, that features 24-hour advanced urgent care and a 24-hour pharmacy, along with an ambulatory surgery center.

“While the increase in pandemic-related expenses, overall rising costs, and investment market losses impacted our finances this quarter, Kaiser Permanente navigated this challenging time providing high-quality care and continued investing in our integrated model including ongoing capital investments to best serve our members. We controlled discretionary spending, optimized COVID-19 testing, addressed surgical backlogs, and managed outside medical expenses,” said executive vice president and chief financial officer Kathy Lancaster. “As we face the ongoing uncertainty and prolonged effects the pandemic is having on the health care industry, we are well positioned to continue delivering high-quality, affordable care and remain vigilant stewards of resources entrusted to us in this dynamic environment.”

Membership

Membership as of March 31, 2022, was 12.6 million, reflecting a growth of more than 88,000 members since December 31, 2021. Medicaid enrollees accounted for almost 33,000 of Kaiser Permanente’s new members.

Q1 2022 and Q1 2021 financial summary

$ in millions, except %Q1 2022Q1 2021
Total operating revenues$24,197$23,185
Total operating expenses$24,269$22,155
Operating income (loss)($72)$1,030
Operating margin(0.3%)4.4%
Total other income and expense (loss)($889)$1,003
Net income (loss)($961)$2,033
Capital spending$872$906