In recent years, Cone Health has experienced solid growth in patient service revenue, generating a 10.3% jump to $1.1 billion in fiscal 2013 over the previous year.
The Greensboro, N.C.-based system received a boost from new operations and added patient volume through its affiliation with Alamance Regional Medical Center in Burlington, N.C., an alliance strategy being widely pursued across the country. It also negotiated higher rates with its insurers.
Yet despite the revenue increase, it finished the year with an operating deficit of $44.1 million as rising salary, benefit and retirement costs contributed to an explosive 18.3% hike in expenses. Its higher volume translated into higher supply costs. And it incurred new expenses from installing an electronic health-record system, opening a new tower and integrating Alamance.
Only investment income and the inherent contribution from the Alamance affiliation allowed the system to finish in the black. “It's been a period of investment; it's been a period of preparation,” said Terry Akin, president and chief operating officer for Cone Health. “It's also been a time of financial challenges. Last year in particular was the perfect storm for us.”
A Modern Healthcare analysis of earnings reports for about 200 hospitals and health systems, both not-for-profit and investor-owned, found that hospital margins narrowed significantly last year despite an improving economy.
Despite a buoyant stock market streak by some publicly traded chains, healthcare providers as a group continue to operate with slim and shrinking margins. Overall, a smaller percentage of healthcare providers saw positive operating margins last year compared with the previous two years.