Healthcare Business News

Cost-reduction plan raises SSM Health Care's bottom line

By Bob Herman
Posted: August 28, 2014 - 6:45 pm ET

SSM Health Care began a short-term plan last fall to pull $150 million of excess costs out of the organization. So far, the strategy has been paying dividends for the St. Louis-based health system, which released second-quarter results (PDF) this week.

The cost-reduction plan included consolidating administrative functions and improving the system's collections and billing departments, spokesman Steve Van Dinter said. “The year is pretty much panning out as expected, and we feel pretty good for the rest of the year,” he said.

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SSM is also likely to benefit this year and in future years from lower health information technology costs. As of June 30, the system had spent $300 million to buy and implement its Epic Systems Corp. electronic health-record system. Such EHR investments have not been uncommon. Providence Health & Services in Renton, Wash., for example, said it spent $750 million on its Epic system.

SSM executives said in their financial disclosure going forward they anticipate “a much lower level of EHR spending,” which will shift more to maintenance and IT staff costs.

SSM posted an $82.3 million operating surplus in the first six months of its fiscal year ended June 30, a far cry from the $1.3 million operating loss in the same period of 2013. Including investment income, SSM's total surplus rose approximately 55%, from $72.2 million in the first half of 2013 to $111.7 million this year.

Revenue soared 40% in the first six months, totaling $2.4 billion. The large upswing almost exclusively came from SSM's acquisition of Dean Health System, a large multispecialty physician group and health plan based in Madison, Wis. That deal closed last fall.

Same-hospital acute admissions declined 1.3% year-over-year, but outpatient visits and emergency room visits on a same-facility basis increased 1.6% and 4.9%, respectively.

SSM said it owns and operates 19 hospitals and has more than 7,000 physicians throughout its care network. It is the eighth-largest Catholic health system in the U.S. by revenue, according to Modern Healthcare research.

Follow Bob Herman on Twitter: @MHbherman

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