Scripps Health, a four-hospital system based in San Diego, booked higher revenue in the first quarter of its fiscal year as the state was able to resume a program that directs extra payments to hospitals that treat large numbers of Medicaid patients.
The system also faced higher costs, however, not only because of the program but also because of rising salary and benefit costs and higher depreciation expenses for two new buildings.
As a result, its operating margin for the quarter ended Dec. 31 declined to 7% from 7.4% in the prior-year period. Excluding the provider-fee proceeds, its first quarter operating margin would have been 5.9%, compared with the prior-year's 6.6% margin.
Like most systems across California, Scripps last year saw its 2014 operating performance affected by revenue losses from the state's provider fee program, which was on hold while California waited for the CMS to approve a two-year extension. The program levies a fee on participating hospitals, and the fee is matched by federal dollars and returned to hospitals in the form of supplemental payments for treating Medi-Cal patients.
The CMS approved the extension in December, which allowed hospitals to collect back payments.
Scripps reported $56.6 million in provider fee revenue for the quarter, which accounted for 71.1% of its year-over-year revenue increase. With the additional funds, Scripps' operating revenue rose to $707.6 million from $627.9 million a year earlier.
The system attributed the rest of the revenue increase to higher emergency department and outpatient visits as well as more trauma cases.
Its operating income was $49.5 million, compared with $46.5 million for the first quarter of fiscal 2014.
Scripps has been adding capacity over the past year. In June, it opened a critical-care pavilion at its Encinitas Hospital, including a new ED and 36 inpatient beds, which Scripps said has already increased revenue. And in December, it opened the Prebys Cardiovascular Institute at the Scripps Memorial Hospital La Jolla Hospital campus.
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