The financial surplus at Henry Ford Health System, Detroit, dropped slightly in the first nine months of 2014, but the system's health plan and other miscellaneous sources of income forestalled a deeper decline.
Henry Ford's total surplus fell 7.5% to $15.3 million in the nine months ended Sept. 30, according to the system's recently posted unaudited financial statements (PDF). Revenue rose only 1.6% to $3.46 billion. Net patient revenue, which is included in that total, declined 1.8%.
The drop in patient revenue is part of the system's emphasis on proactively reducing 30-day readmissions, said Ed Chadwick, CFO of Henry Ford. “The net result is, we've seen a decrease in inpatient discharges and a growth in outpatient,” he said. “But we think that's good … we're situated for the future world of population health.”
However, premiums from Henry Ford's health insurance company grew 3.5% in the first nine months of the year. The system owns and operates Health Alliance Plan of Michigan, an insurer that covers more than 600,000 people, mostly auto workers and Medicare Advantage beneficiaries. The company, which represents about half of Henry Ford's revenue, also offers individual plans on Michigan's insurance exchange established by the Patient Protection and Affordable Care Act.
The health system also was able to offset low patient revenue through “other income,” which includes donations, grants, federal health information technology funds, gift shop and cafeteria sales, and parking garage fees. That bucket of revenue cumulatively increased 26% in the most recent nine-month span, compared with last year.
Henry Ford was able to keep expenses in check. Total expenses rose only 1.2%. Most areas on the expense side saw nominal increases, except for supplies, which soared 9.1% in the first nine months of 2014.
Part of Henry Ford's drag in revenue so far this year came from a continued slowdown of inpatient services. Admissions dropped 1%, and patient days excluding newborns dipped 3.3%.
The five-hospital Henry Ford is preparing for a change in leadership over the next several months. In September, CEO Nancy Schlichting said she will retire in December 2016. Wright Lassiter III, CEO of Alameda Health System, Oakland, Calif., will eventually take over Schlichting's role.
Lassiter will likely face increased competition from the newly merged Beaumont Health, a $3.8 billion system that was officially created this past fall. Henry Ford had been in merger discussions with Beaumont, the primary hospital network in the new system, but talks eroded last year.
Follow Bob Herman on Twitter: @MHbherman
