Froedtert sees higher patient revenue outpaced by rising expenses

Milwaukee-based Froedtert Health reported a small decrease in its operating margin in fiscal 2014 as rising expenses overshadowed a 10.4% increase in revenue.

Like many of its peers, Froedtert booked higher costs from employee compensation, supplies and contract services. It finished the year with an operating margin of 5% (PDF) compared with 5.6% in fiscal 2013.

However, nonoperating income from investments ultimately provided a boost to the bottom line. For the full fiscal year, Froedtert reported a total surplus of $210.3 million on revenue of nearly $1.7 billion compared with last year's surplus of $179.3 million on revenue of $1.5 billion.

The earnings report did not detail patient volume.

Wisconsin implemented a partial Medicaid expansion April 1. Revenue from Medicaid patients increased 18.4% year over year while revenue from self-pay patients decreased 13.4%. In addition, Medicaid revenue represented 9% of Froedtert's total patient revenue in 2014 (a 2 percentage point increase) while self-pay revenue fell to 22%, a 5 percentage point decrease.

The system provided $21.8 million in charity care in fiscal 2014 compared with $19.5 million during the previous fiscal year.

Froedtert also booked higher revenue from Medicare and managed-care insurers.

The system is seeking to gain more experience in the insurance business and is in negotiations to buy a 50% stake in Network Health, a Menasha, Wis.-based insurer. The company is a wholly owned subsidiary of Ascension Health division Ministry Health Care. The transaction is expected to close this year.

Follow Beth Kutscher on Twitter: @MHbkutscher