Chicago's Northwestern Memorial HealthCare ended the first quarter with a weaker margin as labor and supply costs escalated while revenue increased modestly.
The system, which has grown through recent deals, ended the first quarter on Nov. 30 with an operating margin of 6.1%, down from 7.1% the same quarter the prior year. Overall expense growth outpaced revenue gains and Northwestern reported rapid increases in salary and supply costs.
Northwestern ended the quarter the day before it closed on a deal for KishHealth System, a two-hospital system based in DeKalb, Ill. Northwestern has closed or entered deals to rapidly expand its reach, including the September 2014 acquisition of Cadence Health and the pending acquisition of Marianjoy Rehabilitation Hospital in Wheaton, Ill.
Expenses for the quarter totaled $910.1 million, an increase of 4.4% from the same period a year ago. Salaries and professional fee expenses increased to $405.6 million from the prior year, an increase of 8%. Supply costs grew more rapidly, totaling $167.5 million for the quarter, up 12% from the year before.
Revenue for the quarter was $969.6 million, an increase of 3.4% from the prior year. That left the system with an operating surplus of $59.5 million for the quarter, down 10% from the $66.3 million surplus in the first quarter of 2014.