Northwestern Memorial Healthcare, in the first three months after acquiring Cadence Health, boosted its operating margin to 7.1% from 6.7%, according to the combined system’s latest quarterly financial report.
The Chicago-based system, now four hospitals strong, provided the first picture of its financials since closing its merger with Cadence Sept. 1. The two legacy systems also consolidated their debt under a single obligated group in November.
Northwestern, on a combined basis, saw a 52.2% increase in net revenue and a 60.5% increase in its operating surplus in the first quarter of its fiscal 2015, which began Sept. 1. Northwestern did not include pro forma reporting to show what its quarterly results would have been without the impact of the merger. The consolidated reporting distorts direct quarter-to-quarter comparisons because the two quarters compare different systems pre- and post-merger.
Northwestern reported a nearly $1.8 billion gain from the addition of Cadence’s assets to its balance sheet.
In total, Northwestern reported an operating surplus of $66.3 million on combined revenue of $937.8 million in its fiscal first quarter compared with an operating surplus of $41.3 million on $616 million in revenue in the year-ago period, which did not include Cadence.
The two systems had distinct service areas prior to their combination, with Winfield, Ill.-based Cadence serving the suburbs immediately west of Chicago while Northwestern is in Chicago itself.
In the first year after Illinois expanded Medicaid eligibility for low-income adults, Medicaid accounted for a greater percentage of net patient revenue in the quarter, 8.7% compared with 4.9% the prior-year period. Charge-based care declined to 5.4% from 6%.
Following the merger, bondholders agreed to allow the organization to combine Northwestern's $791 million in debt with Cadence's $674 million under a single entity. The system will look for opportunities to continue to streamline its debt structure, said John Orsini, the group's new chief financial officer, during a bondholder call last week.
Follow Beth Kutscher on Twitter: @MHbkutscher
