Partners HealthCare System reported thinner year-over-year operating margins in the first quarter of its fiscal 2014 as the 12-hospital group faced declining patient volume and a more adverse payer
The Boston-based not-for-profit system also said its weaker results reflected investments in its managed-care
organization, Neighborhood Health Plan, to prepare to operate on the Massachusetts insurance exchange and bring in new commercial members. Partners acquired
Neighborhood Health Plan in 2011.
Partners reported (PDF)
$46 million in income from operations in the first quarter of its fiscal year, which ended Dec. 31, compared with a loss of $12 million during the prior year period. Net patient service revenue increased 11% to $1.8 billion.
But when one-time factors were excluded from the year-over-year comparison, Partners' operating margin was 1.8% compared with 2.5% in the first quarter of fiscal 2013.
Those results were “weaker than expected,” Peter Markell, the system's chief financial officer and treasurer, said in an earnings release. Partners experienced the same volume declines
as many of its peers, and also saw more patients with Medicare, Medicaid and Health Safety Net, Massachusetts' free health plan. The system said it absorbed a $287 million shortfall—2% greater than last year—from government payers that reimbursed it below cost.
The system reported a 3.6% decline in same facility discharges as well as a 4% decline in same facility emergency department visits. ED observations declined 2.5%.
Neighborhood Health Plan reported a 0.4% operating margin as it prepares to compete in the public insurance marketplace. But its operating performance improved; insurance premium revenue rose 6% and outpaced medical claim expenses, which increased 5%, the system reported.
Partners will focus heavily on controlling its costs to stabilize operating margins during the remaining three quarters, Markell added.
The first-quarter results included the addition of Cooley Dickinson Health Care
, Northampton, Mass., which became part of Partners last July.Follow Beth Kutscher on Twitter: @MHbkutscher