Ascension's operating surplus exceeded three-quarters of a billion dollars last year, as the hospital system bought new facilities and recorded more outpatient activity.
The system's $753 million operating surplus came from $21.9 billion of revenue in its most recent fiscal year, which ended June 30, resulting in a 3.4% operating margin, according to Ascension's financial documents (PDF) filed with bondholders this week. The operating margin was almost identical to what Ascension recorded in fiscal 2015. Revenue was 6.6% higher.
Ascension is a Catholic, not-for-profit health system that owns 141 hospitals across the country. Its revenue base is bigger than almost all of its for-profit peers. Community Health Systems, a rural hospital operator that has struggled in the past 18 months, had $19.4 billion of revenue last year. Tenet Healthcare Corp. posted $18.6 billion of revenue in 2015. Ascension is four times larger than LifePoint Health.
HCA Holdings, however, continues to sit well above Ascension with roughly $40 billion of annual revenue.
Ascension, which had almost $700 million of cash as of June 30, bulked up after making several deals. In the past year, the St. Louis-based system acquired Crittenton Hospital Medical Center in Rochester, Mich., and Wheaton Franciscan Healthcare in Glendale, Wis. Those two hospital acquisitions added $611 million of revenue.
During the fourth quarter, private-equity firm TowerBrook Capital Partners agreed to buy a stake in Ascension's health IT firm TriMedx. Ascension and TowerBrook also jointly bought part of the troubled revenue-cycle firm Accretive Health this past December. TowerBrook, which owns the St. Louis Blues professional hockey team, and Ascension made the TriMedx deal through their joint venture investment company, TMX Holdings.
Ascension's stable margin was partially a result of keeping labor expenses in check. In 2015, the system boosted its minimum wage to $11 an hour, well above the federal standard of $7.25 an hour. However, Ascension's employee benefits expenses dropped 2.9% in fiscal 2016 “primarily due to a decrease in health insurance expense, reflecting ongoing focus on care management, wellness and plan design,” according to the financial documents.
Ascension did not specify what changes were made to employee health plans. Recent data from the Kaiser Family Foundation show more employers are keeping premiums in check by pushing workers into plans that require more out-of-pocket spending.
Some one-time charges affected Ascension's recurring operations. For example, it reported $129.5 million of expenses tied to a new enterprise resource planning system called Symphony.
Patient volumes varied across Ascension's markets last year, but hospitalizations continued their downward trajectory overall. Ascension's same-hospital inpatient admissions declined 0.2% last year. Total outpatient volumes—including surgeries, physician office visits, clinic visits, behavioral health visits and urgent-care center visits—increased 4.1%.
An Ascension spokesman said in a statement that the system was “pleased to have had a strong and impactful fiscal year.”
Correction: Ascension's ERP system is called Symphony and was not purchased from Symphony Corp.
