Ascension, a large St. Louis-based not-for-profit system running more than 130 hospitals, is seeing the returns from a restructuring effort focused on building regional networks in some markets while exiting others.
The system reported stronger fiscal 2015 financial results, which it attributed to increased patient volume, particularly in outpatient services, behavioral health and urgent care. Its operating margin for the year ended June 30 increased to 3.4%, up from 3% in fiscal 2014. In its recurring operations, its operating margin increased to 4.1% from 3.8%.
Over the past year, Ascension has forged deals to add hospitals in core markets like Michigan and Tennessee while divesting hospitals in Arizona, New York, Washington and Idaho. In Michigan, where it is exploring the takeover of Crittenton Hospital Medical Center in Rochester, it also acquired insurance company U.S. Health Holdings to build its population health management capabilities.
In addition, its strategy has included alliances with other systems. In February, for instance, it formed a joint venture called Amita Health with Adventist Health System in suburban Chicago. The deal brought together five of its own hospitals with four Adventist hospitals.
Outpatient visits increased 3.9% year over year as Ascension's regional networks saw more care shifting to the more cost-effective outpatient setting. But the Affordable Care Act also played a role in boosting volume by expanding insurance coverage. Inpatient admissions increased 0.8%, while emergency room visits were up 4.7%.
The system also tightly managed its costs, holding expense growth to just 2.8% year over year. Although wages and benefits increased, Ascension reduced the number of full-time-equivalent employees per occupied bed by 5.4%. Similarly, while it spent additional funds installing physician practice management software, the investment helped improve its bill collection efforts.
Ascension also reported a decrease in its medical claims expenses after selling a co-ownership stake in Network Health, its Wisconsin-based insurance company, to Froedtert Health in November. The system has plans to expand insurance services in Wisconsin by developing fully insured and self-funded plans for the state's large employers.
In total, Ascension reported a fiscal 2015 operating surplus of $696.5 million on $20.5 billion in revenue compared with a fiscal 2014 operating surplus of $598.7 million on $19.9 billion in revenue.
Although Ascension reported a decrease in bad debt and charity care as more patients gained insurance, it increased its spending on community benefit programs by 7.1%, mostly to provide additional public health programs to people living in poverty.
“Ascension is pleased to have had a strong and impactful fiscal year for our organization and for our patients,” a spokesman said in an e-mail. “Most importantly, this has allowed us to deliver nearly $2 billion in care to those communities and individuals who need it most.”