Northwestern and Cadence have historically held above-average margins and surpluses thanks in part to a favorable mix of commercially insured patients. Half of Cadence's gross patient-service revenue comes from private insurers.
In fiscal 2014, Cadence's operating margin fell to 9.6%, compared with 11% in fiscal 2013. Like many other health systems around the country, Cadence struggled to keep expenses in check. Labor costs, benefits, supplies and other expenditures cumulatively rose more than 15% year-over-year, while revenue grew 13.5%. Cadence's 2014 revenue reached $1.28 billion.
Cadence's total surplus increased 44% to $211.3 million, good for a 16.5% margin, as the system recorded sizable investment returns.
Most of Cadence's revenue comes from Central DuPage Hospital, its 344-bed flagship in Winfield. Central DuPage alone had an operating surplus of more than $200 million in 2014. Cadence lost money, however, within Cadence Physician Group, which encompasses more than 260 physicians. The doctors' group posted a $72.5 million operating loss last year; salaries and wages alone exceeded the group's total revenue.
Cadence's proton-beam therapy center—a facility in Warrenville, Ill., that treats cancer patients with a costly radiation therapy and opened in October 2010—continued to hemorrhage money. It lost $5.4 million from operations in fiscal 2014. In the first six months of 2013, the proton center lost about $8 million. Full-year 2013 figures were not broken out.
Cadence's proton center is the only one in Illinois and is soon to be one of only 13 operating across the nation. The Indiana University Proton Therapy Center in Indianapolis will close this December. Some experts say the proton center business model might be unsustainable due to a lack of patient volume, insurers refusing to pay for treatment and evidence the treatment may not be that beneficial for cancer patients.
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