Health Care & Life Sciences and Health Care & Insurance

Hospitals suffer third-quarter swoon

November 18, 2013

Indiana University Health and Franciscan Alliance saw key parts of their businesses deteriorate sharply in the third quarter, according to new financial reports released by the hospital systems.

Those swoons, though offset by growth in other areas, spooked management at each system, causing each to slash more than 900 positions.

Both systems partly blamed Obamacare, formally known as the Patient Protection and Affordable Care Act. The law is curtailing growth in reimbursements from the federal Medicare program for seniors. And, while the law will subsidize an expansion of health insurance, it appears to be doing so in ways that still leave hospitals exposed to large unpaid bills.

“This is the worst-case scenario for providers,” said Ed Abel, a hospital accountant at Indianapolis-based Blue & Co.

At Indianapolis-based IU Health, the number of days patients stayed at its hospitals plunged 6.8 percent in the third quarter, to fewer than 174,000. In the same three months a year earlier, patients racked up nearly 187,000 days.

What’s worse, IU Health saw outpatient surgeries tank. Total outpatient surgeries numbered 18,051, a 13-percent decline from a year earlier.

All surgeries fell 10.7 percent in the quarter, and were down 5.6 percent during the first nine months.

Imaging exams, another important moneymaker, fell 4 percent in the third quarter and are down 3 percent for the year, in spite of IU Health's slashing imaging prices at the start of the year as much as 80 percent.

Despite the downward trends, IU Health limited its overall decline in operating revenue to just 2.8 percent. That’s because, in spite of a decline in outpatient surgeries, overall outpatient admissions have risen 2.8 percent this year. Also, IU Health increased prices 8 percent this year.

That has actually boosted overall patient revenue from IU Health’s ongoing operations $33 million this year compared with the first nine months of 2012.

Even so, in September, IU Health continued its efforts to slash $1 billion in annual expenses by cutting 935 positions.

“Hospitals across the country are seeing continued declines in admissions,” Jeff Sperring, CEO of IU Health’s Riley Hospital for Children, said at the time. “These changes are reflective of those declines in admissions.”

Franciscan, based in Mishawaka, also suffered a 7-percent decline in inpatient visits during the third quarter.

The declines have cut Franciscan’s operating income by half, from $74.4 million during the first nine months of last year to $35.6 million this year. Total patient revenue at Franciscan has fallen 1.4 percent, to $1.7 billion.

“The results of operations continue to be influenced by economic and industry-wide challenges including constrained volume growth, and cost pressure,” Franciscan executives wrote in their third-quarter financial report.

In October, Franciscan announced it would eliminate 925 positions across its system, including 148 in the Indianapolis area.

Most other hospital systems also have been cutting staff, although only St. Vincent Health’s elimination of 865 workers in June has garnered significant attention.

St. Vincent does not publicly report quarterly financial results. Indianapolis’ other large hospital system, Community Health Network, has yet to report third-quarter results.

 

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