Cedars-Sinai Medical Center in Los Angeles sported a 10% operating margin in its most recent fiscal year, an improvement to its already robust financial state.
Cedars-Sinai, a prominent academic health system, grew its revenue and operating income thanks in large part to more patients having health insurance.
The system's bad debt plummeted 90% in the year ended June 30 as California's expanded Medicaid program and state-based insurance exchange funneled more people into the ranks of the insured. California is one of several Democratic-led states that expanded Medicaid and established an exchange under the Affordable Care Act.
However, most of Cedars-Sinai's business still comes from the more profitable commercial insurance plans, which make up almost two-thirds of its revenue. Community hospitals rely more on Medicare and Medicaid, which have lower payments.
The surplus gained from day-to-day operations jumped 19% year over year to $337.7 million in fiscal 2015, according to audited financial documents shared with bondholders (PDF). Cedar-Sinai's total revenue went up 14.5% to $3.4 billion. The system did not immediately release patient utilization statistics.
Cedars-Sinai's financial documents also gave a glimpse into how slowly healthcare is moving toward full-risk payments. The system's physician groups have contracts with several health insurers in which physicians receive monthly payments for each member instead of billing for each individual service provided, also known as fee-for-service. The capitated payments only represented 2.5% of Cedars-Sinai's total revenue in fiscal 2015, up from a slim 2.3% in 2014.
Cedars-Sinai's total surplus, which factors in investments, was down 27% in fiscal 2015, totaling $322.7 million. Cedars-Sinai and many other systems have fared much worse in their Wall Street investments this year compared with prior years, when investment gains often offset operating losses.