Trinity Health, one the country's largest not-for-profit health systems, improved its operating margin in the first half of its fiscal 2015 as volume increased and it benefited from a recent acquisition.
However, the system incurred costs as it continues to invest in population health initiatives. In addition, losses from health plans and on investments also offset some of the revenue gains.
Trinity reported an operating surplus of $221.4 million on revenue of $7.1 billion for the six months ended Dec. 31, for an operating margin of 3.1%. In the prior-year period, its operating surplus was $170.5 million on revenue of $6.7 billion, for an operating margin of 2.5%.
The fiscal 2014 results included $19.2 million in integration costs from its 2013 merger with Catholic Health East. Excluding those expenses, its operating margin would have been 2.8% in the comparable period.
Discharges across the system increased about 2% year over year (PDF) and outpatient visits grew 5.6%. The system also said that Medicaid expansion has helped reduce the amount of charity care and bad debt in certain markets.
Trinity has been tweaking its portfolio of hospitals and other assets over the past several years. In its earnings report, the system highlighted $9.1 million in income that it recognized from its 2014 purchase of a controlling stake in the Siouxland Surgery Center in Dakota Dunes, S.D.
In December, it also forged an agreement to buy St. Francis Care in Hartford, Conn., pending regulatory approval. The deal includes a $275 million capital commitment over five years.
In addition, it plans to form a joint venture with Heritage Provider Network to set up care networks across the country that are similar to accountable care organizations; Trinity will own 80% of the venture known as Trinity Health Partners.
The system also has entered into agreements to divest assets, including Michigan-based Mercy Health Partners, North, to Munson Healthcare, Traverse City, Mich., in October, and St. Joseph Mercy Port Huron (Mich.) to Prime Healthcare Services in November.
Trinity, under the leadership of Dr. Richard Gilfillan, has an ambitious strategy to build its population health capabilities. The system said it spent $28.8 million on that in the first half of its fiscal year.
The system also has investments in health plans. Its Mount Carmel Health Plan in Ohio and Gateway Health Plan in Pennsylvania and Ohio saw $19.7 million in operating losses in the six-month period, according to the system's financial report.
Like other systems, Trinity's bottom line has taken a hit from volatility in the global financial markets. Losses on its investments led to a net surplus of $241.9 million for the first half of its fiscal year compared with $689.9 million in the prior-year period.
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