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NorthShore's margin improves after more challenging fiscal 2013


By Beth Kutscher
Posted: August 12, 2014 - 3:15 pm ET
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(This article has been updated with a correction.)

NorthShore University HealthSystem, a four-hospital group based in Evanston, Ill., reported significant improvement in its operating margin and bottom line for the nine months ended June 30.

The system's performance has rebounded after a more difficult fiscal 2013, which was also marked by investments in physician integration.

However, unlike many of its peers that are buying up physician practices, NorthShore's salary and benefit costs decreased year-over-year during the nine months. Patient service and premium revenue also increased 6.4%, though the system did not break out operating statistics in its quarterly financial report (PDF).

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In total, NorthShore reported a surplus of $177.2 million on revenue topping $1.4 billion in the first nine months of its fiscal year compared with a surplus of $70.3 million on revenue just below $1.4 billion in the prior-year period.

In a ratings review last October, Moody's Investors Service affirmed its Aa2 rating with a stable outlook, but said physician acquisitions had led to the second consecutive year of lower operating margins for the system.

But NorthShore turned around its performance in fiscal 2014, and is so far running with a 6.7% operating margin compared with 3.3% at this point last year.

Last year, the suburban Chicago system notified employees of plans to cut 130 positions. Salary and benefit costs were $4.7 million lower year-over-year.

Hospital admissions have been declining each year for the group, but outpatient activity has continued to grow. A shift from inpatient to outpatient was cited as the reason behind a recent request to cut $30 million from its $157 million renovation project at its Skokie (Ill.) Hospital. Among other revisions, the changes called for fewer inpatient beds.

NorthShore's flagship campus is Evanston (Ill.) Hospital. In October, NorthShore brought its four hospital campuses under a single Medicare provider number.

Follow Beth Kutscher on Twitter: @MHbkutscher

(This article has been updated to indicate that NorthShore is a four-hospital system.)


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