Methodist Le Bonheur sees surplus plunge as patient mix changes

Methodist Le Bonheur Healthcare in Memphis, Tenn., reported a 47.7% year-over-year decrease in its operating surplus for the first nine months of 2014 as it booked lower revenue per patient, despite higher outpatient volume.

Discharges at the system increased 3.1% while outpatient volume was up 17.8% (PDF). Methodist opened a new hospital in Olive Branch, Miss., and has continued its strategy of employing more physicians to bring in additional patients.

However, the system said it saw fewer commercial patients, which it attributed to more people with high deductible health plans, and a greater share of Medicaid and Medicare patients, which increased 5.2% and 8%, respectively. Tennessee has cut payment rates in the TennCare program, which in turn led to an overall 7.2% decrease in payment rates per adjusted discharge at Methodist.

More physicians and a new hospital also meant a 7.2% increase in salary and benefit expenses and a 3.7% increase in supply and other costs.

The same trends have dogged Methodist throughout its fiscal year, which ends in December.

Methodist's operating surplus for the first nine months of 2014 was $32.1 million on just over $1.2 billion in revenue. During the same period last year, it reported an operating surplus of $61.3 million on revenue just under $1.2 billion. Its operating margin declined to 2.5% from 5% in the year-ago period.

Methodist also realized fewer returns on its investments, for a net surplus of $23.6 million for the nine-month period compared with $74.2 million during the first nine months of 2013.

Follow Beth Kutscher on Twitter: @MHbkutscher