Bon Secours Health System's strategy of hiring new physicians and focusing on its ambulatory care is finally starting to pay off.
Costs associated with adding physician practices and investing in its ConnectCare electronic health records system had dragged down the system's earnings results in recent years.
But the 13-hospital, Marriottsville, Md.-based system had vowed to stay the course. And as implementation costs have slowed and patient volume has picked up, Bon Secours regained its financial footing.
For the nine-month period ended May 31, Bon Secours reported an operating surplus of $86.2 million on $2.7 billion in revenue, with an operating margin of 3.2%. During the same period last year, its operating surplus was $80.3 million on $2.6 billion, with an operating margin of 3.1%.
Bon Secours attributed the improvement to higher volume as well as a shift in its payer mix, which was partly an effect of insurance expansion under the Affordable Care Act. The system reported an 8.9% increase in physician office visits and a 4.6% increase in emergency room visits. Discharges increased 1.4%.
It also continued to see benefits from an initiative that began in fiscal 2012 to bring in more revenue and hold down expenses. The system said the initiative saved $23 million in the first nine months of 2015, and brought in $5.8 million in revenue by focusing on revenue-cycle and clinical documentation improvements.
Its improved financial performance earned it a credit rating upgrade in December from Fitch Ratings, which assigned an A to Bon Secours' bonds, up from an A-. Moody's Investors Service and Standard & Poor's affirmed their ratings of A3 and A-, respectively.
Despite earlier challenges, Bon Secours continued to increase the number of employed clinicians during fiscal 2015. As of May 31, it had 838 full-time equivalent physicians and advanced practice clinicians on staff, an increase of 8.3% year over year.
“Management expects the number of the system's employed physicians and advanced practice clinicians to continue to increase as the system seeks to develop comprehensive provider networks in its markets and to advance its quality and clinical transformation initiatives,” according to its earnings report.
Seven of Bon Secours' eight markets saw a financial improvement in the nine-month period. The one exception was Greenville, S.C., where expenses outpaced revenue growth, largely because of adding physician practices.
At the system's three suburban New York hospitals, operating losses decreased to $15.9 million in the period, down from the prior year's $18.3 million in losses. But the facilities saw a deterioration in their payer mix and continued to incur costs with implementing ConnectCare. Bon Secours in May signed a joint venture deal that would give Valhalla, N.Y.-based Westchester Medical Center a 60% stake in the hospitals.