Not-for-profit hospital giants SSM Health and Texas Health Resources each posted lower first quarter operating income but more than made up for the decline with higher investment income. And both are trying to rebound—SSM, in part, through a financial improvement plan and Texas Health Resources through a joint venture with Aetna.
St. Louis-based SSM Health saw its operating income fall to $34.4 million in the first quarter, a 2.1% operating margin on revenue of $1.6 billion, the Catholic-sponsored hospital company said in its latest financial disclosure.
That compared with operating income of $46.9 million in the prior-year period on revenue of $1.5 billion for an operating margin of 3.1%.
In the first quarter, SSM developed extensive financial improvement plans for its 20 hospitals and is pursuing $200 million in savings and revenue enhancements, the company said in its financial disclosure.
"This includes reducing unnecessary expenses and reevaluating and redesigning its work to best serve the strategic and operational priorities of (SSM), while continuing to ensure exceptional patient care and service," the disclosure said.
SSM spokesman Brian Westrich did not provide details of the plans beyond the financial disclosure.
Dallas-based Texas Health Resources posted a drop in operating income to $60.6 million in the first quarter from $99.3 million in the prior-year quarter, according to its latest financial disclosure.
Revenue in the quarter was essentially flat at $1.1 billion compared with the prior-year quarter.
The 24-hospital, not-for-profit health system has a new hospital in the works in suburban Frisco, Texas, and a new insurance joint venture with Aetna.
Texas Health Resources plans to build an 80-bed hospital and major medical office building in Frisco beginning the middle of this year, the system said in its disclosure. The 20-acre campus is expected to open in late 2019.
In July, the system in a 50/50 joint venture with Aetna will open a new health plan called Texas Health Aetna, said Genevieve Caruncho-Simpson, chief operations officer of the new plan.
The plan will offer fully-insured options to Texas employers as well as to self-funded plans, said Texas Health Aetna Chief Financial Officer DeWayne Wilson. It will not have a capitated product at launch, he said.
Caruncho-Simpson said the plan may appeal to employers because of Texas Health's brand recognition in the region and Aetna's size and scope on the national health insurance scene.
Additionally, the joint-venture plan will offer a local contact center for member assistance as well as a 24-hour text service for contact with local emergency room physicians, she said.
Aetna will continue to sell its own health insurance products in Texas Health's markets as well, she said.
A $187.2 million non-operating gain in the first quarter, comprised mostly of investment income, allowed Texas Health Resources to post a net surplus of $230.2 million compared with a net surplus in the year-earlier period of $98.5 million.
A big non-operating gain in the first quarter also boosted SSM Health. The system's first-quarter net surplus was $107.5 million, including an investment gain of $69.6 million, compared with a net surplus of $33.4 million, including an investment gain of $19.7 million.