Texas Health Resources sees better Q2 amid investment losses

A boost to revenue and non-operating gains helped Texas Health Resources' second quarter of 2014 outpace its first. But even with the improved performance, the not-for-profit system fell short of where it was this time last year.

The 25-hospital Arlington, Texas-based system this week reported a surplus of $148.5 million on $1 billion in revenue for the quarter ended June 30 (PDF). That was double the surplus for the first quarter of the year when Texas Health reported a net surplus of $73.3 million on $942 million in revenue.

The improvement was the result of non-operating gains that nearly doubled and growth in operating revenue that exceeded growth in expenses.

But it wasn’t enough to catch up with where the system was at the end of June last year as higher expenses, particularly related to salaries, wages and employee benefits and other operating expenses, stripped away gains.

Additionally, net unrealized losses on investments of $13.3 million for the six-month period hit the system’s bottom line. Other systems have been reporting major investment gains in the quarter. The unrealized losses left Texas Health with a surplus of $221.8 million for the first half of 2014, down 15.7% from $263.3 million during the same period a year ago.

Looking ahead, the third quarter of Texas Health’s fiscal year will mark the beginning of a transition period for the system as longtime CEO Doug Hawthorne steps down from the top role. Hawthorne will be succeeded, effective Sept. 1, by Barclay Berdan, who is currently serving as executive vice president and chief operating officer for the system.

Follow Rachel Landen on Twitter: @MHrlanden