Ascension Health, the third-largest health system by revenue, reported an $87 million net loss in the first quarter of its fiscal 2015, ended Sept. 30, as it incurred $220 million in losses on its investments.
In recent years, Ascension's sophisticated investment strategy has helped provide additional funds in a difficult operating environment. But the first quarter volatility compounded challenges in a quarter that included rising expenses that outpaced revenue growth.
Revenue at St. Louis-based Ascension increased to $5.2 billion (PDF), an increase of 5.4% above the $4.9 billion in revenue it reported during the first quarter of fiscal 2014.
However, the system reported higher operating expenses, primarily due to rising salary, supply and purchased services costs.
It finished the quarter with an operating surplus of $119 million, for an operating margin of 2.3%. In contrast, it booked an operating surplus of $127 million, for an operating margin of 2.6%, in the first quarter of fiscal 2014. Investment returns in the year-ago period brought its net surplus to $430.7 million.
Total discharges declined 2.3% year over year, while outpatient visits increased 2.2% across the group of more than 100 hospitals.
Fiscal 2014, which ended June 30, saw a benefit from new affiliations. But Ascension now is pruning its portfolio. In the first fiscal quarter, the system signed deals to sell a controlling stake in Tucson, Ariz.-based Carondelet Health to Tenet Healthcare Corp. and Dignity Health as well as to divest Mount St. Mary's Hospital in Niagara Falls, N.Y. to Catholic Health.
Both deals are still pending.
Last month, Ascension also entered into a deal to sell its Missouri-based Carondelet Health to Prime Healthcare Services. It also formed a joint operating agreement with Adventist Health System that will manage the two systems' nine hospitals in suburban Chicago.
About half of Ascension's states have expanded Medicaid. The system reported that revenue from self-pay patients now represents just 4% of the total, down three percentage points. However, the share of Medicaid revenue remained steady at 11%, while there was a 3 percentage-point increase in the share of revenue coming from commercial contracts to represent 49% of the total.
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