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The Dose - JK Wall

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Health Care & Life Sciences / Life Science & Biotech

Hospitals enjoy third-quarter recovery

December 1, 2014

After suffering a financial swoon a year ago, Indiana’s hospitals look like they’re back on firmer—though not rock-solid—footing. At least for now.

The third-quarter profits soared at both Community Health Network and Franciscan Alliance, according to their reports to bondholders in November.

Those reports come after the Indiana University Health hospital system reported third-quarter profits that were nearly four times higher than in 2013.

Hospitals around the country have seen patient spending pick up as Obamacare and increasing employment have boosted the number of folks covered by health insurance. Indiana's large hospital systems are also enjoying larger profits as a result of their aggressive cost-cutting last year.

Indianapolis-based Community, which operates eight hospitals in central Indiana, posted $45.3 million in income from operations during the three months ended Sept. 30. That was up by 145 percent from the same quarter a year ago, when it earned $18.5 million from operations.

Revenue for the quarter rose by more than $50 million, or by 11.5 percent, compared with the same quarter last year.

Community enjoyed a 9.3 percent profit margin on its health care operations, more than double what it was making last year.

Meanwhile, Mishawaka-based Franciscan, which operates three hospitals in the Indianapolis area, saw its $6.5 million loss from operations in the third quarter last year turn into a $48.7 million profit in the same quarter this year.

Franciscan earned about $12 million more in revenue this third quarter versus a year ago, or an increase of 1.9 percent. But the real difference came on expenses. Franciscan, which cut 925 positions a year ago, spent $43 million less this third quarter than last year.

Franciscan’s profit margin on operations was a healthy 7.5 percent during this year’s third-quarter.

The hospital systems’ executives don’t provide much commentary in these reports, and what they do say is an assessment of the year so far, not just the third quarter.

“The results of operations continue to be influenced economic and industry-wide challenges including constrained volume growth and cost pressures,” wrote Franciscan’s executives in their report to bondholders.

Indeed, Franciscan’s inpatient admissions were down 5.8 percent in the third quarter, compared with last year. But that was a big improvement from the first half of the year, when Franciscan’s inpatient admissions were down by 10.8 percent.

While Community doesn’t provide detailed quarterly statics on its patient volumes, the information it does provide suggest key parts of its business improved last quarter, compared with earlier this year.

The decline in inpatient admissions slowed. Community said they were down 1.9 percent for the first nine months of the year, compared with a decline of 3.2 percent after the first half of the year.

Inpatient surgeries rose in the quarter. Community reported that they were up by 1 percent during the first nine months of the year, whereas they had been down by 1.2 percent during the first half of the year.

Emergency rooms visits, imaging scans and physician work all accelerated. ER visits were up 2.4 percent at mid-year but 4.5 percent at the end of September. Imaging scans were up 2.9 percent at mid-year but 4.0 percent after September. Physicians’ relative-value units—a hospital metric for the value of physicians’ time with patients—was up 13 percent at mid-year but 23 percent after September.

One worrying sign for Community is that outpatient surgeries fell faster in the third quarter. They were down 2.9 percent at the end of September, versus 2.5 percent at mid-year.

Hospitals are hoping that the extra 130,000 Hoosiers that obtained health insurance this year continue to keep their facilities busy.

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