Henry Ford Health System, the Detroit-based system that has survived in recent years on a slim margin, largely broke even again last year. It did so with a small positive operating margin, compared with a small loss in 2013.
The not-for-profit system ended the year with revenue growth of 3.9% compared with expense growth of 3%.
Fewer patients were admitted to Henry Ford's five hospitals, but demand grew across its ambulatory and other lines of business to give the system a $27.8 million operating margin on revenue of $4.7 billion, for a margin of 0.6%. That's compared with a negative margin of -0.3% in 2013, when it reported an operating loss of $11 million on revenue of $4.5 billion. The system's average margin in the prior four years was 1.3%.
Henry Ford's inpatient admissions dropped 2% in 2014 as the system worked to reduce avoidable readmissions and increasingly delivered care outside its hospitals, the system said in financial statements. Henry Ford reported 3% growth in demand for outpatient care last year.
Hospitals across the country have reported similar shifts to outpatient care since the Great Recession, and executives have moved aggressively to expand ambulatory investment. They also moved to diversify into health insurance. Early results from health systems that have recently entered the insurance business are mixed.
Henry Ford's health plan, the Health Alliance Plan, which the system acquired nearly three decades ago, has not been immune to market disruption under the Affordable Care Act. The plan's self-insured and Medicaid businesses grew 12% and 19%, respectively, last year. Fully insured commercial business dropped 7%. The plan reported a net loss of more than $1.6 million last year compared with a nearly $800,000 margin the prior year, according to data from the National Association of Insurance Commissioners. That's even as higher premiums helped boost premium revenue last year by 4%.
In an interview earlier this year, Nancy Schlichting, Henry Ford's outgoing CEO, described the system's health insurance business as increasingly complex but one that can benefit the system as hospital use declines. “When you have the premium dollar coming from Medicare, Medicaid and some of the HMO business, it's very good news when you can drive down medical costs,” she said.
The Health Alliance Plan covers 680,000 people and is offering plans through both public and private insurance exchanges.
Henry Ford will continue to work to reduce its hospital admissions, Schlichting said, and she anticipates continued growth in the ambulatory market. “The great thing about Henry Ford Health System is we've never been hospital-centric,” she said. “While we have five hospitals, we also own a significant health plan, so we're in the insurance business. We have over 40 ambulatory sites. We have the full continuum of care. We're in retail health. So we think this is the right thing to do. Certainly from a health plan perspective, reducing medical costs is what we're trying to do.”