The affiliation significantly helped St. Joseph’s bottom line in 2013, as system executives marked it down as a $1.7 billion non-operating gain. But in fiscal 2014, which ended June 30, St. Joseph had to deal more with challenging day-to-day business issues: namely, lower inpatient volumes, troubles with California’s provider-fee program and rising expenses.
California’s Medicaid program, called Medi-Cal, is awaiting CMS approval for its new hospital-fee program, which levies a tax on hospitals and then distributes supplemental federal funds back to hospitals based on how many low-income patients they treat. Executives said in a disclosure to bondholders (PDF) the murky provider-fee situation has led to lower revenue and consequently less revenue than it would have normally recorded. Other California health systems such as Scripps Health, San Diego, have cited similar problems in recent quarterly reports.
Like other health systems across the country, St. Joseph said inpatient volumes are not what they used to be. Inpatient discharges and patient days dropped by 4.5% and 3.4%, respectively, in 2014 compared with 2013. Those figures did not include inpatient admissions at Hoag’s hospitals.
Overall, St. Joseph recorded an operating loss of about $16.1 million on $5.6 billion of revenue in 2014, compared with a $49.7 million operating gain on nearly $5 billion of revenue. Revenue rose 13.6% year over year, but expenses increased at a faster 15.1% rate. Including investments, St. Joseph realized a $292.8 million surplus, good for a 5.2% total margin.
St. Joseph disclosed it is also working through several legal matters, including a class-action lawsuit related to a February 2012 data breach of patients’ health information and a complaint that alleged one of the system’s hospitals, 138-bed St. Joseph Hospital in Eureka, Calif., had mold problems.
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