Partners HealthCare reports drop in its operating surplus

Partners HealthCare reported a large drop in its operating surplus in its fiscal second quarter, as both provider and insurance activity took income hits.

The 12-hospital, Boston-based system—whose flagship facilities include Massachusetts General Hospital and Brigham and Women's Hospital—reported a 4.5% decline in same-facility discharges and a 1.6% drop in outpatient activity. It also saw fewer observation and emergency department visits and performed fewer laboratory services and minor procedures.

In addition, the system faced $17 million in payments resulting from shortfalls in Massachusetts' Health Safety Net Trust Fund, which covers healthcare services for low-income patients.

The challenges represented a continuation of the difficult operating environment that has persisted since the beginning of its fiscal year. On the provider side, operating income declined to $13 million in the second quarter ended March 31, down from $33 million in the year-ago quarter.

The system also struggled on the insurance side as the rollout of health reform has been bumpier than expected in the state, despite its early lead in insurance expansion. Partners said it lost $1 million each month from the state's “inability to effectively implement an insurance exchange pursuant to the Affordable Care Act.”

In total, Partners reported a $10.3 million surplus in the second quarter on revenue of $2.7 billion. That compares with a surplus of $133.2 million on $2.5 billion in revenue in the year-ago period. Its operating margin declined to 0.1% compared with 1.6% in the prior-year period.

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