Sharp HealthCare's financial performance remained strong last quarter, continuing what has been solid growth in recent years as the system steadily gains market share.
The San Diego-based system ended its third quarter with operating revenue and surplus that exceeded budget, even before Sharp received an additional $47 million from California's hospital fee program.
The fee program revenue—awarded to hospitals for care of patients in Medi-Cal—contributed to a 129% increase in operating surplus on revenue of $758.3 million for the three months that ended in June compared with the same quarter a year ago. Other California systems have reported soaring revenue as California distributes the program's cash.
The system's recent strong performance earned Sharp an upgrade this year from credit rating agency Moody's Investors Service. Moody's upgraded Sharp to Aa3 from A1. That's despite plans to take on more debt for construction at multiple hospitals over five years. Cash from strong operations will help finance the capital projects, as will $200 million in new debt.
Moody's analysts credited the system's ability to control expenses and manage the length of patients' stays as reasons for improved margins during the past four years. The system has also seen continued strong volume, in part because of enrollment growth in Sharp's health plan. Sharp has increased its market share each of the past 14 years and is the largest provider in the San Diego area, analysts said.
For the nine months that ended in June, Sharp reported operating surplus of $250.5 million, including $72.6 million from the hospital fee program, on revenue of $2.3 billion. That's an increase of 92.5% from operating surplus of $178.4 million for the same period a year ago
Sharp executives seem confident their recent performance will continue. “Overall, management believes this level of profitability is sustainable and it expects to sustain double-digit cash flow margins for the foreseeable future,” Moody's said.
