Healthcare Business News

Cone Health boosts operating margin to 2.6% by cutting costs

By Beth Kutscher
Posted: August 28, 2014 - 6:00 pm ET

A focus on cost-cutting efforts helped mark a significant year-over-year improvement in Cone Health's fiscal third-quarter operating margin and net surplus.

The Greensboro, N.C.-based system, which has five facilities, is moving forward after a fiscal year when it witnessed rapidly rising expenses because of compensation and supply costs as well as the cost of integrating its latest acquisition, Alamance Regional Medical Center, Burlington, N.C.

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But after seeing an operating margin of less than 1% in the third quarter of last year, the system reported a 2.6% operating margin for the quarter ended June 30.

In total, Cone reported a net surplus of $21.5 million on revenue of $348.4 million. That compares to a net surplus of $10.3 million on revenue of $329.6 million.

While the overall story was positive, Cone said revenue was under budget because of a shift from inpatient to outpatient activity, largely driven by the two-midnight rule, a CMS policy change that makes it harder for hospitals to bill short stays at higher inpatient rates.

Its hospitals treated 3.2% fewer inpatients in the third quarter and performed 5.1% fewer surgeries. Outpatient visits, however, increased 9.6% year over year and emergency department visits were up 2.4%.

Cone also has carefully managed expenses, including labor costs. It reported 253 fewer full-time-equivalent employees, year to date, after opting not to fill vacant positions. It also came in under-budget on building, equipment and software maintenance.

Follow Beth Kutscher on Twitter: @MHbkutscher

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