Health Care and Health Care Businesses and St. Francis and Health Care Costs and Health Care & Life Sciences and Health Care & Insurance

Franciscan cuts its way to higher profits

August 25, 2014

About 100 fewer patients per night stayed at Franciscan Alliance hospitals during the first half of the year compared to the same period last year. But Franciscan, which operates three hospitals in the Indianapolis area, offset that nearly 11-percent drop by spending less on staff.

The upshot was profit more than tripling from the same period a year earlier, to nearly $80 million.

The results from Franciscan, headquartered in Mishawaka, largely mirrored those reported earlier this month by Indianapolis-based Indiana University Health.

Franciscan admitted 38,323 patients to its 13 hospitals in Indiana and Illinois, down 10.8 percent. Its average daily census was 975 compared to 1,084 last year.

“The results of operations continue to be influenced by economic and industry-wide challenges including constrained volume growth and cost pressures,” Franciscan executives wrote in their mid-year financial update to bondholders.

Franciscan pulled in revenue from patients of $1.23 billion, a 5-percent increase.

The increase was entirely attributable to larger payments from the Indiana Medicaid program. Franciscan recorded an extra $7.5 million in special Medicaid payments because the programs doled out 12 months of payments this year to make up for 2013 payments that were delayed while the state waiting on federal regulatory approval.

Franciscan was able to save $61.2 million in employee benefits and salaries as well as in physician payments from last year. Franciscan eliminated 925 positions last fall, including 275 at its Indianapolis-area operations.

The result was that Franciscan profit from operations jumped to nearly $80 million from almost $25 million for the same period last year. Both totals exclude the impact of unrealized investment gains and losses, and are adjusted for differences in Franciscan’s special Medicaid payments, its interest expenses, as well as its gains from its ownership of affiliated organizations.

Franciscan, using a slightly different methodology, calculated its profit margin from operations at 5.9 percent during the first half of the year, up from 1.7 percent a year ago.

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