Eastern Maine gets bigger but operating margin lags

Eastern Maine Health Systems, an eight-hospital group based in Brewer, reported a smaller operating margin in the first nine months of fiscal 2014 as it integrates its latest acquisition.

The system acquired Mercy Health System, based in Portland, last October from Catholic Health East, following CHE's merger with Trinity Health. Eastern Maine assumed Mercy's $73 million in debt and pledged to invest another $115 million over five years.

Mercy had been an underperforming asset for CHE Trinity and posted a fiscal first-quarter loss of $2.2 million, according to reports from rating agencies.

In its first three fiscal quarters, Eastern Maine saw revenue rise 30.4% to $973 million. However, its operating surplus fell to $8.2 million because of the impact of higher compensation and supply costs. During the same period in fiscal 2013, Eastern Maine booked an operating surplus of $13.3 million on revenue of $746.5 million.

At its flagship facility, 357-bed Eastern Maine Medical Center in Bangor, the system reported a 2.6% decline in admissions and an 8.4% decline in emergency department and urgent-care visits during the nine-month period. However, outpatient encounters overall increased 5.3%.

Despite booking higher revenue, the hospital's operating surplus decreased 44.3% to $8.8 million.

The system is currently undertaking a building project to modernize its largest hospital.

The group also is investing rapidly in the infrastructure it needs to implement new payment models and care coordination programs.

All eight system hospitals are participating in a Medicare Pioneer Accountable Care Organization, as well as in commercial ACOs.

Follow Beth Kutscher on Twitter: @MHbkutscher