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Catholic Health Services unit sees 2013 drop in operating surplus as expenses rise


By Rachel Landen
Posted: April 14, 2014 - 2:45 pm ET
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Catholic Health Services of Long Island reported a significant drop in its operating surplus for 2013, despite a slight increase in patient-services revenue for the fiscal year. Rising expenses outpaced increasing revenue for the year, causing the surplus drop.

The six-hospital not-for-profit system based in Rockville Centre, N.Y., realized $18.9 million in operating surplus for 2013, down 64% from the previous year's surplus of $52.7 million. The decline comes as Catholic Health Services of Long Island's patient-services revenue saw a 2% bump from $1.88 billion in 2012 to $1.92 billion in 2013.

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In July 2013, Moody's Investors Service downgraded the system's bond rating, citing, among other factors, material declines in volume. During the first five months of 2013, inpatient volume dropped 10.8%. Further, a change in the state's policy that allows for elective angioplasty procedures without open-heart backup caused the system to experience a decrease in the number of open heart surgeries, cardiac catheterizations and angioplasty procedures.

Also, the system has struggled in recent years with a weakened payer mix, as its Medicaid share has continued to grow to more than 10% of its market, Moody's noted.

The system's 2013 revenue improvement was largely offset by increases to nearly all of its expenses, including salaries, employee benefits, supplies, depreciation, amortization and impairment. One of the biggest expenses was for implementing an electronic health-record system, which was reported at the outset to cost an expected $144 million.

Further, the system has had to deal with leadership turnover in recent years. Following the retirement of long-term CEO James Harden in 2011, the system went through several management changes that included an interim CEO, a CEO who spent just eight months on the job, and the return of the interim leader. Finally, in July 2013, Dr. Alan Guerci, who has been with CHS for more than 20 years, assumed the role of president and CEO.

The new CEO has already “implemented leadership changes to streamline management and improve system cohesion,” according to Moody's.

Follow Rachel Landen on Twitter: @MHrlanden


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