Cone Health improved its operating margin in the fourth quarter of fiscal 2014 as outpatient volume increased and the system tackled rising expenses, particularly labor costs.
Greensboro, N.C.-based Cone reported a net surplus of $9.3 million (PDF) on $379.4 million in revenue for the quarter ended Sept. 30, compared with a net deficit of $18.9 million on $304.7 million in revenue for the year-ago period.
Its operating margin improved to 2.8% compared with -9.8% in the fourth quarter of fiscal 2013.
Cone said it lost inpatient volume as more managed-care companies put pressure on providers to place short-stay patients in observation status rather than the higher-paying inpatient status. The change follows the CMS' “two-midnight rule,” which went into effect in October 2013 and used patients' anticipated length of stay as the standard for whether physicians should bill for observation or inpatient status.
At Cone, inpatient volume decreased 6.6% during the full-year period and observation cases increased 22.4%. Emergency room visits increased less than 1% while surgery volume decreased 3.1%. However, outpatient visits increased 8.3% year over year in fiscal 2014, driven by not only observation cases but its rehabilitation, cardiology and radiology service lines.
The system also said it has delayed filling vacant positions, leading to a workforce with 236 fewer full-time equivalent employees than it had budgeted. It also began offering lump-sum pension payouts in June to vested employees who no longer work for the system.
As a result, salary costs declined 7.3% in the fourth quarter compared with the year-ago period, and fringe benefits declined 11.4%.
After a tough fiscal 2013 marked by rising expenses and acquisition costs, Cone managed to turn around its performance.
For the full-year, Cone reported a net surplus of $61.1 million on $1.4 billion in revenue compared with fiscal 2013's net deficit of $14.6 million on $1.3 billion in revenue.
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