Dignity Health, the San Francisco-based system with 39 hospitals, grappled with rising costs in the first quarter of its fiscal 2016, which widened its operating loss year over year.
A number of factors took a toll on its bottom line, including higher staffing levels, increased salary and benefit expenses, rising drug prices and other fees such as training costs for transitioning to the ICD-10 coding system.
Those costs ultimately overshadowed a 16.6% increase in revenue (PDF) from treating more patients as well as higher supplemental Medicaid payments in California and Arizona. Dignity's first-quarter admissions, adjusted for outpatient activity, increased 1.6% year over year.
In total, Dignity reported a first-quarter operating loss of $47.5 million on $3.1 billion compared with a $15.2 million operating loss on $2.7 billion in revenue during the prior-year period.
Like many of its peers, it also took a hit to its investment portfolio, with investment losses totaling $258.8 million in the quarter compared with $4.7 million in the prior-year period.
Dignity is halfway toward implementing its 10-year Horizon 2020 strategy, which marks its transition to a value-based operating model. For fiscal 2016, Dignity said it plans to implement a number of initiatives to improve care and lower costs in seven clinical service lines, including emergency medicine and critical care.
It currently has more than 100 value-based payment contracts covering 650,000 lives, according to its earnings report. And more revenue is coming from outpatient activity, which now acounts for 43% of its total revenue, a 2 percentage-point increase over the prior-year period.
Dignity also has been active in forming partnerships. In September, it finalized a deal with Ascension Health and Tenet Healthcare Corp. to jointly own Carondelet Health Network in Tucson, Ariz. Dignity invested $30 million for a minority stake in the joint venture.
And this month, it formed a deal to sell a 20% stake in St. Joseph Medical Center in Stockton, Calif., to Bay Area rival Kaiser Permanente, based in Oakland. The partnership will provide more capital to the hospital and also create a local hospital affiliate for Kaiser health plan members.
