Ascension continues to benefit from its investment in ancillary businesses amid expected declines in its hospital operations.
The largest Catholic health system in the country reported $282 million of operating income on operating revenue of $17.09 billion through the first nine months of its fiscal 2018, down from a $749 million operating income on operating revenue of $17.15 billion over the prior-year period.
St. Louis-based Ascension was buoyed by its non-operating gains of $1.52 billion through the first nine months of 2018, up 68% from $903 million. That boosted its net income to $1.68 billion, up 8.4% from $1.55 billion.
The organization's operating results reflect its investment in population health management and transition from an inpatient to outpatient focus as well as anticipated declines in volume, rising drug costs, increased uncompensated care and a rising share of Medicaid beneficiaries, Ascension said in its third-quarter earnings report.
Ascension is in the midst of a major restructuring that is expected to save the organization $400 million in fiscal 2018 and $61 million in 2019. As the health system aims to reduce its hospital footprint and trim its leadership structure, it will look for partners that provide care in other settings, such as urgent care, skilled nursing, home health and telemedicine.
It will also focus on growing its ancillary businesses, including its revenue-cycle management, supply chain, drug manufacturing, technology management and investment arms. They brought in $150 million in additional revenue in 2017.
"We are seeing the fruits of those investments," said Ascension President and CEO Anthony Tersigni, who was among the names floated for the Veteran Affairs Secretary position. President Donald Trump on Friday tapped acting Secretary Robert Wilkie. "We are counting on our solutions division subsidiaries to grow our bottom line as the bottom line of our acute-care services diminish so we can continue to serve the poor and vulnerable," Tersigni said.
Ascension's total admissions dropped 3.1%, while its physician office and clinic visits rose 3.8%.
The declines in operating revenue and volume were also due to its divestitures of St. Joseph Hospital and Door County Hospital, according to the report. On a same facility basis, total operating revenue increased $37.2 million as Ascension improved its revenue-cycle management and recouped 2.5% higher patient revenue per discharge.
Its operating margin was 1.6% through nine months of fiscal 2018 while its net income margin was 9%, primarily due to robust investment returns.
Total operating expenses increased 2.3% on a same-facility basis, primarily from a 22.5% uptick in purchased services as Ascension standardizes its revenue cycle and transitions employees, the company said in its earnings.
That trend will likely continue as Ascension develops clinically integrated systems of care that focus on more economical and convenient care settings, Tersigni said.
"We are actually disrupting ourselves," he said. "We are rethinking our entire organization and how we treat people, moving away from the hospital campus and to other low-cost locations closer to home."