Updated on March 31.
SSM Health's acquisition of Saint Louis University Hospital in late 2015 contributed to a huge decline in the hospital chain's operating income last year.
Catholic-sponsored SSM, a 20-hospital health system based in St. Louis, posted operating income of $10 million in 2016, compared with an operating gain of $229.7 million the prior year, the company disclosed Thursday.
SSM Health disclosed Friday that it intends to sell $500 million of taxable bonds with proceeds used for corporate purposes and to refund up to $200 million of commercial paper notes. Fitch has rated the offering AA- and S&P has rated it A+.
SSM bought the university hospital from investor-owned Tenet Healthcare in September 2015, to gain an academic presence around its home-market hospitals.
SSM has big plans for the medical campus. It has agreed as part of the deal to spend up to $550 million over five years to replace the current 356-bed teaching hospital and build an outpatient center.
In 2016, the hospital cost SSM Health more than it brought in. The hospital contributed $299 million in revenue that year as overall system revenue for the year jumped to $6.1 billion from $5.5 billion in 2015.
However, expenses related to the hospital were $336.7 million in 2016, a shortfall from revenue of about $38 million.
In its disclosure, SSM Health said it is trying to increase operating margins through cost reductions, revenue cycle improvements and integration of its acquisitions. With operating income of just $10 million on $6.1 billion in revenue, SSM Health's operating margin was 0.2%. In contrast, its operating margin was 4.2% in 2015.
An SSM Health spokesman declined to comment, saying that the company is in a quiet period as it prepares for a bond offering.
SSM Health's 20 hospitals are in Missouri, Illinois, Oklahoma and Wisconsin.
A $99.6 million one-time operating gain in 2015 on curtailment of company pension plans also made for a tougher comparison against 2016, the disclosure shows.
SSM Health posted a 2016 non-operating gain of $88.7 million, mostly on investment income, compared with a non-operating loss of $19.8 million in 2015.
Combined with operating income, SSM Health showed a net surplus of $93.5 million in 2016 compared with a net surplus of $198.1 million in 2015.