reported a large drop in its operating surplus in its fiscal second quarter as both provider and insurance activity took income hits.
The 12-hospital, Boston-based system—whose flagship facilities include Massachusetts General Hospital and Brigham and Women's Hospital—reported a 4.5% decline in same-facility discharges
and a 1.6% drop in outpatient activity. It also saw fewer observation and emergency department visits and performed fewer laboratory services and minor procedures.
The volume decline coincided with a shift to more government payers, which accounted for 45% of its gross patient service revenue in the second quarter.
In addition, the system faced $17 million in payments resulting from shortfalls in Massachusetts' Health Safety Net Trust Fund, which covers healthcare services for low-income patients.
The challenges represented a continuation of the difficult operating environment
that has persisted since the beginning of its fiscal year. On the provider side, operating income declined to $13 million in the second quarter, which ended March 31, down from $33 million in the second quarter of fiscal 2013.
But it also struggled on the insurance side as the rollout of healthcare reform has been bumpier than expected in the state, despite its early lead in insurance expansion efforts. Partners said it lost $1 million each month from the state's “inability to effectively implement an insurance exchange pursuant to the Affordable Care Act.”
It also incurred $6 million in costs relating to newly approved hepatitis C drug Solvadi, which costs $84,000 a year
. The state has not yet determined whether it will pay Medicaid managed-care organizations for the expensive treatment, Partners said.
Those issues resulted in a $10 million loss for Neighborhood Health Plan, its insurance arm, compared with an $8 million gain from insurance activity last year.
In total, Partners reported a $10.3 million surplus in the second quarter of its fiscal year on revenue of $2.7 billion. That compares to a surplus of $133.2 million on $2.5 billion in revenue during the same period last year.
Its operating margin declined to 0.1% compared with 1.6% in the prior-year period.
However, it did receive a boost from its July 2013 acquisition of Cooley Dickinson Health Care
, which contributed $49 million in revenue.Follow Beth Kutscher on Twitter: @MHbkutscher