North Shore-LIJ's margin dinged by weather, insurance startup

North Shore-Long Island Jewish Health System battled through a sluggish first half, with the Great Neck, N.Y.-based health system still feeling the financial chill from last year's icy, bitter-cold winter.

The poor weather led to decreases in patient volumes, especially for scheduled procedures, officials said in a financial disclosure to bondholders (PDF). It also had to deal with higher temporary staffing, snow removal and utility costs.

In addition, North Shore-LIJ is still in the early stages of launching and running its own health insurance operation, North Shore-LIJ CareConnect, which started offering commercial and Medicaid managed-care plans late last year. The plans are available both on and off New York's insurance exchange, created under the Patient Protection and Affordable Care Act.

North Shore-LIJ is still working to staff and build its insurance arm, which has driven up expenses, executives said. In the first half of 2014, North Shore-LIJ's health insurance companies brought in more than $32 million in premium revenue.

North Shore-LIJ's operating margin in the first six months of this year (PDF) totaled 1.1%, down from 1.7% in the same period in 2013. Revenue increased 4.9% to $3.6 billion as more volumes shifted to the outpatient setting. However, expenses increased at a faster 5.5% clip, leaving the system with a $38.1 million operating surplus. That's down more than a third from $57.2 million recorded in the first half of 2013.

However, like many other health systems, investment income made up for much of the decline on the operations side. North Shore-LIJ's total surplus rose almost 25% to $122.2 million. That equated to a 3.4% overall margin, compared with 2.9% in the first six months last year.

North Shore-LIJ has 15 hospitals, according to its website, and is the dominant provider on New York's Long Island—and it's in the process of nabbing several facilities outside of its main service area. The system has signed initial deals this year to take over 189-bed Northern Westchester Hospital in Mount Kisco, N.Y., and 238-bed Phelps Memorial Hospital in Sleepy Hollow, N.Y.

Earlier this month, North Shore-LIJ also signed a deal with the Cleveland Clinic to become the Clinic's exclusive heart partner in New York. North Shore-LIJ will be able to perform cardiovascular services for anyone within the Cleveland Clinic's national network of large employers in exchange for a management fee.

Follow Bob Herman on Twitter: @MHbherman