“We expect that operating deficits will continue as TUHS executes its strategic objectives, although failure to meaningfully narrow the operating loss would be cause for rating concern,” S&P said in its report.
Temple reported a $10 million operating loss on about $1.4 billion in revenue in its fiscal 2014, ended June 30, according to recently released unaudited financial figures (PDF).
That’s still an improvement from fiscal 2013, when Temple recorded an $18.2 million operating loss. Excluding investment income and unrestricted philanthropy, the system lost $25.3 million in fiscal 2014, still better than its $31.9 million loss in 2013, according to S&P.
Since 2011, under S&P’s methodology, Temple’s operating losses have totaled $93.7 million.
Total acute-care discharges at Temple dropped 3.4% year-over-year, and more than 80% of the system’s inpatient acute-care discharges were Medicare or Medicaid.
Despite the red ink, Robert Lux, Temple’s chief financial officer, said in an interview he remains optimistic and thought the system had a “remarkable” year. Temple has a speculative credit rating, treats a vast majority of the region’s poorest people and has weathered continued declines in inpatient utilization—but its losses didn’t worsen, thanks to cost-cutting efforts, and its cash position held steady, he said.
“My standard of success is year-over-year improvement,” Lux said.
Many industry experts believe academic medical centers like Temple may have to consider new strategies, perhaps with other systems, to stay relevant and viable in an era driven by population health.
Asked if Temple is considering a merger or partnership with another area system, Lux responded that the Philadelphia healthcare market is getting active—local media reported Friday that the city’s Jefferson Health System and Abington (Pa.) Health are exploring a partnership—and all players are talking to each other. “We look at every opportunity that comes along,” he said.
Most of Temple’s losses came from 64-bed Fox Chase Cancer Center and 160-bed Jeanes Hospital, both in Philadelphia, not its 728-bed flagship hospital. Lux said Health Partners Plans, a provider-owned HMO of which Temple is part owner, also struggled with increased expenses, including high costs related to Sovaldi, the hepatitis C drug. Sovaldi, produced by Gilead Sciences, has faced heavy criticism in the past year for its $1,000-per-pill price tag.
Follow Bob Herman on Twitter: @MHbherman