Montefiore Medical Center ended last year with a sharply lower operating margin than in the prior year, as rising wages and supply costs eroded its income.
New York-based Montefiore closed the books in December with an operating gain of $40.2 million on revenue of $3.5 billion. That amounted to a roughly 62% drop in operating income from 2013, when Montefiore recorded income of $105 million on revenue of $3.5 billion.
Montifiore's operating margin fell to 1.2% in 2014 compared with 3.1% in 2013.
Operating revenue increased 3.8% last year but operating expenses increased 5.9%. The cost of supplies increased most rapidly, growing 9.9% to $1.2 billion in 2014. Salaries and wages increased 4.3% last year.
Montefiore reported more hospital admissions last year, but patients left the hospital more quickly and hospital occupancy declined to 89.6% from 93.3% the prior year. Demand for ambulatory care increased, with growth in the number of outpatient, emergency room and ambulatory surgery visits.
Montefiore has announced plans to move rapidly into new contracts, known as risk contracts, which include financial incentives for hospitals and doctors to more aggressively manage the cost of medical care. Montefiore CEO Dr. Steven Safyer said in March that the medical center would seek to enter risk contracts for all Medicare and Medicaid patients by 2018.
Safyer announced the plans during a visit by HHS Secretary Sylvia Mathews Burwell as she championed the shift of Medicare into risk contracts, which include accountable care and bundled payments. Medicare will seek to contract for half of all its business that isn't managed care under such contracts by 2018, HHS announced in January.
Montefiore ended 2014 with net income of $51 million compared with $181.8 million the prior year.