Healthcare Business News

SCL Health's margin slips, but Medicaid expansion fuels optimism

By Bob Herman
Posted: August 19, 2014 - 3:00 pm ET

SCL Health's operating margin fell slightly in the first half of its fiscal year, but the Denver-based system believes new healthcare reform efforts such as Medicaid expansion will help it in the long run.

SCL Health owns eight hospitals and manages another. Four are in Colorado, a state that agreed to expand Medicaid coverage under the Patient Protection and Affordable Care Act to individuals who earn up to 138% of the federal poverty level. Those four Colorado hospitals represent 60% of SCL Health's business.

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Chief Financial Officer Lydia Jumonville said it’s still somewhat early to have reliable figures on how Medicaid expansion is affecting the system. However, in the six months ended June 30 (PDF), Medicaid as a percentage of SCL Health’s gross patient revenue increased slightly from 9% to 10%, while self-pay and uninsured patients decreased from 5% to 2%.

“In Colorado, (Medicaid expansion) had a big impact on the system, and in many ways a positive impact,” Jumonville said. Some of its previously uninsured patients may be gaining coverage through the state’s insurance exchange, as well, she noted.

SCL Health realized $28.5 million in operating surplus on $1.19 billion in revenue in the first six months of this year. That’s a 6.9% decline compared with the $30.6 million operating surplus on $1.16 billion in revenue it reported in the previous six-month period. The operating margin fell to 2.4% from 2.6%.

The system’s total surplus rose 27% to $93.6 million, thanks to significant investment gains from a booming stock market.

SCL Health is the middle of a multiyear effort to strip between $350 million and $400 million of costs out of the system. Components of the cost-cutting initiative include labor benchmarking, shifting patients to lower-cost settings such as ambulatory surgery centers and improving the efficiency of billing and coding. Jumonville said the executive team realizes lower reimbursements will continue to be the norm, which is putting pressure on systems to keep operating expenses down.

“We are really trying to look at what the gap would be if you’re trying to live on Medicare-type reimbursement from all payers,” Jumonville said.

The system’s acute admissions dropped 3.8% in the first six months of fiscal 2014, compared with the same period a year ago. When factoring in outpatient services, admissions decreased 2% year-over-year. Surgeries, meanwhile, increased 0.6%, and emergency department visits were up 3.1% in the first half of 2014.

SCL Health sold three hospitals in the past year, but also created a joint venture that Jumonville said has been doing well thus far. National Jewish Health, Denver, created a jointly owned entity to provide inpatient and outpatient services at Saint Joseph Hospital, SCL’s flagship facility.

Follow Bob Herman on Twitter: @MHbherman

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