Sharp HealthCare, a five-hospital, San Diego-based system, reported a lower operating margin in its first fiscal quarter as patient volume declined and its expenses grew.
However, the system still received higher payment rates from insurers that contributed to a 7.3% increase in patient service revenue—better than anticipated. Premium revenue from its health plan division also increased 5.4%, though rates were slightly below expectations.
For the quarter ended Dec. 31, Sharp reported an operating surplus of $57.2 million (PDF) on revenue of $688.1 million, for an operating margin of 8.3%. In the prior-year period, its operating surplus was $56.3 million on revenue of $659.6 million, for an operating margin of 8.5%.
Admissions decreased 1.5%, but the system experienced a 21.3% jump in outpatient visits, primarily due to increased volume at its outreach laboratory. Emergency room visits also grew 10.9%.
On the expense side, Sharp saw a 3.1% increase in its supply costs, primarily due to higher costs for drugs. Supply and staffing costs contributed to an overall 4.7% increase in its expenses year over year.
Sharp also reported that it officially dissolved its accountable care organization Dec. 23. The system dropped out of the Medicare Pioneer ACO program in August after failing to achieve savings. The ACO incurred $278,000 in expenses in the first quarter of fiscal 2014.
In its Rees-Stealy medical group, 71.2% of revenue is coming from capitated payments, on par with the 71.3% of revenue it reported for the same period last year.
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