Dignity Health began its fiscal 2015 with a first-quarter operating loss, booking lower revenue and rising expenses while getting hit with lower investment returns and a California issue that significantly impacted revenue.
The 37-hospital, San Francisco-based system reported an operating loss of $15.2 million (PDF) for the quarter ended Sept. 30 compared with an operating surplus of $243.9 million during the same period in fiscal 2014. Revenue decreased to $2.7 billion, down 4.8% from the comparable period's $2.8 billion.
Dignity also booked lower returns on its investments to finish the quarter with an overall shortfall of $28.9 million compared with a gain of $369.7 million in the prior-year period.
Like all providers in California, Dignity lost out on revenue from the state's provider-fee program, which is still waiting for CMS approval. Last year, the program added $57.6 million in income to its balance sheet.
Last year's quarterly results also saw a boost from a $230.5 million one-time gain from an accounting adjustment related to its 25% stake in Optum360, a revenue-cycle management firm that is operated as a joint venture with UnitedHealth Group.
However, excluding those items, revenue from patient care and premiums actually increased 4.3%, or what would have been 8.2% without the loss of the provider-fee revenue, the system said in an earnings report.
Dignity reported a 3.1% increase in admissions adjusted for outpatient activity and also said its payer mix improved.
As its hospitals saw more patients with Medicaid and fewer self-pay patients, the system's provision for bad debts decreased 50.7% to represent 1.4% of gross revenue, compared with 3.1% in the prior-year period.
However, Dignity's expenses continued to grow, with salaries and benefits increasing 5.3% year over year and supply costs up 7.9% as its pharmaceutical and surgical costs increased.
Dignity also spent $164.8 million on expanding and renovating its hospitals and equipment, down slightly from $165.4 million during the first quarter of fiscal 2014.
Follow Beth Kutscher on Twitter: @MHbkutscher
