When Dignity Health reported its earnings for fiscal 2013, the system highlighted strong operating performance and a more than threefold increase in its operating surplus.
Much of the San Francisco-based health system's growth came from its 2012 acquisition of U.S. HealthWorks, an occupational medicine provider that helped boost its ambulatory care volume.
But that wasn't the strongest part of its balance sheet.
Dignity's overall surplus rose to $811.9 million from $134.9 million the previous year because the value of its investments soared.
The recent runup in stock prices hasn't just been good for investor-owned hospital chains—it also has helped many not-for-profit systems stay in the black.
While ratings agencies acknowledge balance-sheet benefits from the market's recent climb to new heights, they caution that riskier investments may create additional uncertainty for less-stable provider groups.
According to its financial report, Dignity invests in not only equity and debt securities, but also alternative investment vehicles such as private equity, real estate and hedge fund opportunities.
Its investment income helped offset a $17.4 million operating loss in the first quarter, when it still produced an excess of revenue over expenses of $71.8 million.
“Our continued strong investment plan … has helped produce the balance-sheet metrics you see here,” Lisa Zuckerman, senior vice president of treasury services, said during Dignity's most recent bondholder call.
Hospital margins have been shrinking in recent years, according to a Modern Healthcare analysis of earnings reports for about 200 acute-care providers.