Soaring labor costs cut into Trinity Health's operating gains during the final six months of 2015.
Contract labor costs at the Livonia, Mich.-based system nearly doubled to $100.4 million from $51 million during the prior year's same six-month period.
Wages and salaries increased 14% and employee benefits jumped 26% compared with the prior-year period. Raises accounted for some of the growth in labor costs, as did new hires and new employees who joined the system after Trinity Health acquired St. Joseph's Hospital Health Centerin New York and St. Francis Care in Connecticut. Overall, labor costs contributed to Trinity's 15% hike in operating expenses, which totaled $7.86 billion for the final six months of 2015. That's compared with the prior year's operating expenses of $6.8 billion.
With 90 hospitals across 21 states, Trinity is one of the nation's largest systems. Other large hospital systems also reported higher contract labor costslast year, which raised speculation that the sector could face a shortage of skilled labor as the economy improves. For-profit systems have reported some labor markets are more competitive than others.
Investment in data analytics and network integration also added $29.6 million to Trinity's operating expenses for the six months compared with the prior year's period. The system also recently announced plans to build its own supply distribution network in a bid to better manage costs.
Revenue also grew, but not enough to outpace expenses. Trinity Health reported an increase in the number of patients who sought care at the system's hospitals and clinics. More patients also had insurance, and the system's reported bad debt, or unpaid medical bills, declined by $55.1 million from the same prior-year period.
Revenue increased 12% to $7.89 billion for the six months. The prior year, Trinity Health reported revenue of $7.03 billion for the period.
Trinity ended the six months with an operating margin of 0.5% compared with 3% the prior year. Hospitals that Trinity Health acquired in the last half of 2015 had a combined operating loss of $11.2 million, the system reported.
Trinity Health's investments plunged with the volatile markets late last year. The system ended the six months with a net loss of $176.9 million compared with a net gain the prior year of $248.8 million.