Sanford Health's operating surplus dropped by a third in its fiscal 2016, due almost entirely to losses suffered in the Midwest system's health insurance company.
Sanford, a 43-hospital system based in Sioux Falls, S.D., operates an insurance arm like several other hospital systems throughout the country. But many of those integrated systems have watched their margins decline in the past year because more of their insured members received care, driving up medical claims costs.
The Affordable Care Act's online exchanges have been a major source of high medical claims for many insurers, forcing some of the big traditional carriers to cut back on their participation. Sanford, which covers 172,000 people, had about 17,000 exchange members in North Dakota and South Dakota as of March 31.
Sanford Chief Financial Officer JoAnn Kunkel told Modern Healthcare earlier this year the system was experiencing losses on its ACA population. But most of the claims were coming from a new fully insured commercial contract.
Sanford closed its 2016 fiscal year, which ended June 30, with a $130 million operating surplus on $4.23 billion of revenue, resulting in a 3.1% operating margin, according to unaudited bondholder documents. That compared with Sanford's $195 million operating surplus and $3.72 billion of revenue, or 5.2% margin, in fiscal 2015.
After adding in investment profits, Sanford's total surplus was $142.2 million in fiscal 2016, down from the $169 million surplus last year.
Sanford's inpatient admissions and emergency room visits were basically flat year over year, while surgeries increased 2.7%.