Trinity Health, a health system that operates in 21 states, ended its fiscal year with a healthier margin as an improved economy and the Affordable Care Act's insurance expansion boosted demand for medical care.
The Livonia, Mich.-based organization reported more demand inside and outside its hospitals in the year ended June 30. That growth is the result of employment gains and patients who gained subsidized insurance and Medicaid coverage under the healthcare reform law, Trinity Health Chief Financial Officer Benjamin Carter said.
“The economy is really improved in many, if not all, of our markets,” Carter said. Meanwhile, 14 states where Trinity Health operates expanded Medicaid eligibility under the law. Hospital admissions increased 1.7% last year, he said. Using a broader measure of volume that also incorporates outpatient demand, volume increased 4.6% across 18 of the system's 19 markets.
Trinity Health ended the year with an operating surplus of $470 million, or an operating margin of 3.3%, compared with $400 million and 3% the prior year. (After accounting for pension, restructuring and consolidation costs, the system's operating surplus totaled $457 million for the year compared with $173.3 million the prior year.)
Trinity Health's operating revenue increased 7% to $14.3 billion for the year. More than half the increase was driven by higher volume, and $67 million was attributable to a 2014 deal for a controlling stake in the specialty hospital Siouxland Surgery Center in Dakota Dukes, S.D.
Operating costs were up 6.7% year over year, and labor and technology were the biggest factors. Patient demand has increased the need for labor, boosting the system's full-time employment count by 2.3%. The system is also grappling with rising salaries in a tight labor market for nurses, care coordinators and other high-demand workers. “It's been a long time since we've felt those pressures,” Carter said.
Investment losses drove the system's net income for the fiscal year down 36% to $637 million.
Trinity Health made modest progress last year toward a goal of moving three-quarters of its business into alternative payment models to fee-for-service. The system ended the year with 25% of its business under alternative contracts, up from 20% at the start of the year.
In October Trinity expanded its participation in Medicare's voluntary test of bundled payments and applied for a new Medicare accountable care model. Both initiatives are administered by the CMS Innovation Center, an agency that had Trinity Health CEO Dr. Richard Gilfillan as its first director.