Earnings rose sharply at not-for-profit Seattle Children's Healthcare System over the past fiscal year, as the pediatric system saw a 37% increase in its operating surplus thanks to strong patient service revenue.
The system reported a $175.85 million operating surplus on $1.17 billion in revenue for the fiscal year ended Sept. 30, 2014, compared to a $128.02 million surplus on $1.03 billion in revenue during the same period the prior year. Patient revenues increased by 12% during the fiscal year.
The system still suffered a nearly 20% drop in non-operating income, which fell from $58.68 million in FY 2013 to $47.29 million in FY 2014. The decline came from a decrease in net unrealized gains on trading securities, and a steep change in the valuation of interest-rate swap agreements, which were valued at a $233,000 loss at the end of this fiscal year, down significantly from a gain of $11,353,000 reported the year before.
However, the system's total surplus increased 20% to $223.14 million, from $186.71 million during the prior year, and it reported a strong FY 2014 operating margin of 15.08%, up from 12.39% the prior year.
The system also provisioned more than 45% less for uncollectible accounts in the past year. It's not the only hospital that has reduced its indigent-care budget this past fiscal year; health systems are seeing positive results from the decline in the uninsured rate brought on by the Affordable Care Act, and in some states from rising Medicaid populations, thanks to the federal program's expansion in those states.
Seattle Children's saw only a 2% increase in Medicaid managed-care patient revenues and a 2% decrease in regular Medicaid revenues.
One of the system's top payers, Mountlake Terrace, Wash.-based Premera Blue Cross, added Seattle Children's to its provider network in August for plans sold on Washington state's insurance exchange. That inclusion came after the hospital filed a lawsuit against the state's insurance commissioner, complaining that several plans on the exchange were inadequate because they excluded the hospital from their networks.
Premera represented about 12% of the hospital's payer mix in FY 2014, up 1% from the year before.
Correction: An earlier version of this article reported that the valuation of interest-rate swap agreements were down from a gain of $11,353, reported the year before. The prior year gain should have been $11,353,000. It also said the system provisioned more than 50% for uncollectible accounts. That figure should have been 45%.
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