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Northwestern reports margin squeeze despite higher revenue


By Beth Kutscher
Posted: July 16, 2014 - 8:30 pm ET
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Northwestern Memorial HealthCare reported a higher surplus from operations in the third quarter as its major medical group acquisition continues to provide an earnings boost.

However, like last quarter, the group’s operating margin decreased year-over-year and it also reported smaller investment returns for the period, which ended March 31.

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Northwestern Memorial expanded its reach from its downtown Chicago campus into the city’s suburbs with the 2010 acquisition of Lake Forest (Ill.) Hospital. The system forged an agreement in May to merge with Cadence Health, a two-hospital system based in Winfield, Ill., about 30 miles west of Chicago.

In total, Northwestern reported a surplus of $111.3 million on revenue of $617.5 million, compared with a previous surplus of $160.5 million on revenue of $427.8 million.

Its operating margin declined to 8.9% from 11.8% as higher salary, benefit and supply costs exceeded the revenue gains.

Northwestern also saw a 1.8% decline in acute admissions and a 2.4% drop in equivalent admissions. Emergency room visits and surgeries were essentially flat year-over-year.

Despite being located in a Medicaid expansion state—and in a county that signed up new Medicaid enrollees early under a CMS waiver—Northwestern reported that self-pay patients made up 19% of its accounts receivables at May 31, compared with 8% at Aug. 31 last year. The share from Medicaid patients declined three percentage points to 8%.

Its allowance for uncollectible accounts rose to $75.4 million, or 16.2%, up from $41.7 million, or 14.5%.

Follow Beth Kutscher on Twitter: @MHbkutscher


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