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Inova's surplus soars as operating expenses fall


By Bob Herman
Posted: August 4, 2014 - 2:45 pm ET
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Not-for-profit Inova Health System, Falls Church, Va., recorded lofty gains in its operating and total surplus in the first half of fiscal 2014 as its expenditures dropped year over year, the system reported recently.

Operating expenses at the five-hospital system decreased 0.1% in the six months ended June 30 (PDF), a rare occurrence in the sector. Many not-for-profits—such as NYU Langone Medical Center in New York, Sentara Healthcare in Norfolk, Va., Northwestern Memorial HealthCare in Chicago, and Mercy Health in Cincinnati, (formerly called Catholic Health Partners) among others—have reported stable overall finances recently, but most have faced rising operating costs.

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Inova said it saved money by outsourcing its dietary services and reducing staff members who worked on its Epic Systems Corp. electronic health-record system. Inova completed its Epic EHR and revenue-cycle implementation last year.

The system also recorded higher outpatient surgical volumes, which helped boost net patient-service revenue. Outpatient surgeries rose 13.3%, totaling almost 23,000 in the first six months of the year.

Overall, Inova's operating income climbed 75% to $111.2 million. Total revenue increased 3.7% to $1.31 billion. Inova's operating margin in the first half of fiscal 2014 sat at 8.5%, a sharp improvement from the 5% mark in last year's comparable period.

Total surplus, which includes gains from investments, almost doubled in the first six months to $245 million.

Inova is one of several hospitals and health systems in Virginia that has not benefitted from Medicaid expansion under the Patient Protection and Affordable Care Act. Gov. Terry McAuliffe has urged state lawmakers to expand the program to the state's 400,000 low-income residents, and in June, he said he would bypass the General Assembly to expand health insurance, though no move has been made yet.

However, Inova's results show that its proportion of Medicaid patients has started to go down. In the first half of this year, Medicaid accounted for 8.7% of Inova's gross patient revenue, compared with 9.8% in the same period in 2013. Self-pay patients also declined, as more received coverage from managed-care plans, according to Inova. But bad debt increased by 48%.

Follow Bob Herman on Twitter: @MHbherman


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