Dignity Health sees third-quarter loss

Dignity Health, a 37-hospital system, reported an operating loss (PDF) in the third quarter of its fiscal year because of higher expenses and a halt in revenue from the California provider-fee program.

The San Francisco-based system also booked a smaller surplus compared to the third quarter of fiscal 2013, because of a drop in its net investment income.

Dignity saw a $17.4 million operating loss on revenue of $2.6 billion for the quarter ended March 31, compared with an operating surplus of $42.3 million on revenue of $2.5 billion in the prior-year period.

Factoring in investment income, Dignity reported a total surplus of $65.6 million in the third quarter, compared with a surplus of $248.1 million in the year-ago period.

All of Dignity's hospitals are located in Medicaid-expansion states, so the system reported that charity care represented just 1.9% of expenses in the quarter, compared with 2.5% last year. Bad debt similarly decreased 9.1%.

The system also reported higher supplemental payments from Arizona's provider-fee program, which was approved in April 2013, and covered the period from October 2012 to December 2013. Supplemental Medicaid payments totaled $28.5 million in the quarter.

However, like other providers in California, Dignity is waiting for the CMS to approve the state's proposed extension to its provider-fee program, which expired Dec. 31. The net favorable impact from the program was $33.3 million in the third quarter of fiscal 2013, but the system has recognized no revenue from the program since its expiration.

While California passed legislation to extend the program through 2016, the CMS must still review and approve the plan.

Still, the gains in Arizona helped Dignity report a 3.2% increase in revenue per adjusted admissions even as its census dropped. Admissions across the group declined 2.8%, while adjusted admissions declined 1.8%.

Salary and benefit expenses increased 1.6% and supply costs jumped 7.5%, which the system attributed to higher pharmaceutical costs as it expanded its infusion services. It also reported a $4.1 million decline in revenue from meaningful-use incentives.

Follow Beth Kutscher on Twitter: @MHbkutscher